Final answer:
An economics associate professor's real and nominal salaries have risen if she can purchase more goods and services with her raise. Real income is generally more important than nominal income, as it reflects purchasing power and living standards, regardless of the time period in question.
Step-by-step explanation:
When an associate professor of economics receives a $200 a month raise and can buy more goods and services than last year, her real salary has risen and her nominal salary has risen. The nominal salary indicates the amount of money she is receiving before taking into account inflation or changes in the cost of living. Real salary, on the other hand, adjusts for inflation and reflects the purchasing power of the money she earns. In this scenario, since she can afford more goods and services, the increase in her nominal salary has outweighed any potential inflation, resulting in an increase in real income as well.
Regarding attention to real income or nominal income, it typically makes more sense for individuals to focus on their real income because it conveys the actual purchasing power and living standards. Nominal income does not account for changes in the cost of living or inflation rates, which can be particularly important in times of high inflation. This perspective remains consistent whether considering today's economic environment or that of the 1970s.