The misconception that an increase in nominal income or wealth translates directly to an increase in real purchasing power, despite similar rises in price levels.
Income measured only in monetary terms, without adjusting for changes in purchasing power due to inflation or deflation.
Real income represents the income of an individual, group, or country adjusted for changes in purchasing power caused by inflation. It contrasts nominal income, which is not adjusted for such changes, providing a more accurate representation of economic well-being over time.
