What is real income best defined as?

Real income is best defined as monetary intake based on purchasing power because it considers not only the amount of income received but also adjusts for inflation and the cost of living. This concept highlights the actual value of income in terms of the goods and services it can purchase, providing a more accurate reflection of an individual's economic well-being.

When evaluating real income, it's essential to recognize that simply having a higher net salary or a total earning figure does not equate to improved financial status if the cost of living increases at a similar or greater rate. Therefore, real income gives a clearer perspective on how much one can truly afford in terms of lifestyle and spending power relative to economic conditions.