Question

Assume the CPI increases from 100 to 110 and a person's nominal income increases from $50,000 to $55,000 over the same period. This person's real income has

Answer 1

Answer and Explanation:

The computation of the real income percentage is as follows:

The Increase in CPI would be

= (110 - 100) ÷ 100 × 100

= 10%

And, the increase in nominal income is

= ($55,000 - $50,000) ÷ ($50,000) × 100

= 10%

As the CPI and increase in nominal income percentage is same

SO the real income would also remains the same