Suppose in 2016 Paula's nominal income was $55,500 and in 2019 her nominal income was $61,000....

Suppose in 2016 Paula's nominal income was $55,500 and in 2019 her nominal income was $61,000. Also suppose the consumer price index in 2016 was 103 and the consumer price index in 2019 was 126. The percentage change in Paula's real income was,

	a.	22.3%
	b.	11.3%
	c.	9.9%
	d.	–10.2%
	e.	-11.3%

Solutions

Expert Solution

Real income =(nominal income /CPI)*100

Real income in 2016=(55500/103)*100=53883.4951=53883.50

real income in 2019=(61000/126)*100=48412.6984=48412.70

%change inm real income =((real income of the year-old real income )/old real income )*100

=((48412.6984-53883.4951)/53883.4951)*100

=-10.1530101

=-10.2%

The real income changes by -10.2%

Option d

Rahul Sunny answered 2 years ago

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