In 2017 Sabrina earned an annual salary of $100,000 as an engineer. In 2018, her income rose to $105,000. The inflation rate in 2018 was 2%. How did Sabrina’s nominal income and real income change in 2018 compared to 2017?
answer choices
Nominal income increased and real income increased

no

Both Sabrina's nominal and real income increased

Explanation:

Her nominal income during 2017 was $100,000 and it increased to $105,000 during 2018,  a $5,000 increase.

Sabrina's real income during 2017 was $100,000 (using 2017 as the base year), and her real income during 2018 was = $105,000 / 1.02 = $102,941. That means that her real income increased by $2,941