Real income adjusts nominal changes for inflation Steps:

• Subtract inflation from directors' nominal increase: 15% - 3.4% = 11.6% real rise.
• Subtract inflation from workers' nominal increase: 5% - 3.4% = 1.6% real rise.
• Both results positive, so real incomes increased for both groups. Why D is correct:
• Real income rises when nominal percentage increase exceeds inflation rate, which holds for both. Why the others are wrong:
• A: Incorrect, as both nominal increases surpass 3.4% inflation.
• B: Incorrect, as it duplicates D but mislabels the mutual rise.
• C: Incorrect, as workers' 1.6% real increase means their income rose, not fell.

Final answer: D