Real income reflects purchasing power after inflation adjustment

Steps:

• Real income is nominal income divided by a price index to account for inflation.
• A loss in real income occurs when nominal income growth lags behind price increases.
• For union members, this means their wages, adjusted for inflation, have declined relative to the cost of living.
• Thus, option D directly describes this scenario.

Why D is correct:

• By definition, real wages = nominal wages / price level; a fall indicates reduced purchasing power.

Why the others are wrong:

• A: Tax rate increases affect disposable income but not the core real wage calculation.
• B: Rising prices cause inflation but alone do not confirm real income loss without wage data.
• C: Savings are assets, not income; their inflation-adjusted fall does not imply wage-based real income loss.

Final answer: D