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lectur11-page16 - Remember inflation? If our nominal income...

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16 Complex Relationships: Income from All Sources ($) Age Some of you might think that we would want income from all sources to look like the graph above. Constant income from the point of retirement until expiration. Constant income translates to a “fixed income.” Is that what we really want? What do you think will happen to your cost of living as the years go by? What have we observed happens to prices over time?
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Unformatted text preview: Remember inflation? If our nominal income is constant over the years, then our real income will be decreasing as inflation erodes the value of our fixed nominal income. What will happen to our standard of living as time progresses with a fixed nominal income? It will most probably erode with the declining purchasing power of our constant (fixed) income....
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