[A-Level]Real Income and Nominal Income

Nominal income is the income calculated at current market prices, whereas real income is the income calculated at constant market prices.

e.g. In the year 2007,( given that in the question the base year is set in 2006 )

Norminal income = P in 2007 times Q in 2007
Real income = P in 2006 times Q in 2007

So the real income in 2007 can be used to compare with that in 2006 (i.e. P in 2006 times Q in 2006) to see the change in the quantity of goods produced. Any difference between the two is the difference in the quantity of goods produced, as the price is kept constant and has no influence in the change in real income from 2006 to 2007.

If there is a change in the slope of a function, that means there is a change in the endogenous variable. (e.g. If the slope of the consumption function increases (that means the curve is steeper), that means the MPC has increased as well, as MPC is defined as the slope of the function by mathematical calculation. An increase in MPC contributes to an increase in the endogenous variable, which is the income-induced consumption--the product of MPC and Yd ) But in the 2-sector model we assume that MPC is constant throughout, so it is unlikely that they will ask about the change in endogenous variable, unless the qusetions are not sticking to the assumptions and the model.

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