Question

Mr. Lee received a raise at a job this year, but he finds that he has less money to spend each month even though his spending habits are the same. What is the most likely reason for this situation?

(1 point)

The supply of goods and services has risen.


Unemployment has dropped across the country.


Mr. Lee is not tracking his finances.


Inflation was greater than Mr. Lee's raise.

Answer 1

Inflation was greater than Mr. Lee's raise.

Explanation: If prices rose by more than his raise, his nominal income increased but his real purchasing power fell, so he can afford less even with the same spending habits.