Question

8) If your nominal income in 2014 was $50,000, and prices doubled between 2014 and 2017, to have the same real income, your nominal income in 2017 must be A) $50,000 B) $75,000 C) $90,000 D) $100,000 Answer: D AACSB: Analytical Thinking 9) If your nominal income in 2014 is $50,000, and prices increase by 50% between 2014 and 2017, then to have the same real income, your nominal income in 2017 must be A) $50,000 B) $75,000 C) $100,000 D) $150,000. Answer: B AACSB: Analytical Thinking

Answer 1

8)	Nominal Income in 2014	$50000
	The Inflation is doubled between 2014 and 2017, so the purchasing power decreases to 50%
	So, we can buy $ 25000 worth goods . If we want to buy $ 50000
	worth of goods the nominal value should be $ 100000 in 2017
	To have the same real income the nominal Income should be $ 100000
9)	Nominal Income in 2014	$ 50000
	The Inflation is increased by 50% between 2014 and 2017, so the purchasing power decreases to 75%
	So, we can buy in 2017 $ (50000*.75) $ 37500 worth of goods. So, if we want to buy the $ 50000 worth
	in 2017 the nominal Income should be $ 75000
	To have the same real income the nominal Income should be $ 75000