ECONOMICS
FOREIGN CURRENCY MARKETS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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positively related
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negatively related
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Either A or B
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None of the above
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Detailed explanation-1: -Definition. Relative income is the income compared to a particular reference income. The reference income can be the income of oneself but at another time point (habituation) or the income of relevant others at any moment in time (social comparison).
Detailed explanation-2: -The RIH can be simply stated: as a person’s income (consumption) increases relative to his income standard, so does his SWB. The higher the person’s income is relative to the standard (or norm), the greater his happiness.
Detailed explanation-3: -Example of Income Effect If the price of a cheese sandwich increases relative to hotdogs, it may make them feel like they cannot afford to splurge on a hotdog as often because the higher price of their everyday cheese sandwich decreases their real income.