Question

If your nominal income is​ $80,000 and your real income in base year prices is​ $71,500, what is the​ cpi?

Answer 1

The consumer price index would change in concert with the real value of the income that the consumer has. In this case, the nominal value is 80,000 with a real value of only 71,500. Taking these two values and dividing them gives a quotient of 1.118, which is rounded up to 1.12, multiplied by 100 to give a CPI of 112.