Question

"Bill’s nominal income in 1990 was $1,009 per month. The CPI had a value of 149 in 1990 and had a value of 192 in 2017. What is Bill’s real income in 1990, measured in base year dollars? Enter a number rounded to two decimal places with no dollar sign"

Answer 1

$677.18

Explanation:

Data provided in the question:

Bill’s nominal income in 1990 = $1,009 per month

CPI value in the year 1990 = 149

CPI value in the year 2017 = 192

Now,

The Consumer price index ( CPI ) is given as :

CPI =
`\frac{\textup{Cost of basket in the current year}}{\textup{Cost of basket in the base year}}*100`

thus,

for the given case of year 1990

149 =
`\frac{\textup{1,009}}{\textup{Real income in the year 1990}}*100`

or

Real income in 1990 =
`\frac{\textup{1,009}}{\textup{149}}*100`

or

Real income in 1990 = $677.18