Assume your annual income in 2017 was $75,000 and the CPI for 2017 was 245.12. If...
Assume your annual income in 2017 was $75,000 and the CPI for 2017 was 245.12. If you expect your annual income to increase to $85, 000 in 2018 and CPI is expected to be 247.59 in 2018, estimate your expected increase in real income between 2017 and 2018
Homework Answers
Answer
Nominal increase rate =((current annual income -last year annual income)/last year annual income)*100
Nominal increase rate in income=((85000-75000)/75000)*100
=13.3333333
=13.33%
Inflation rate =((current year CPI -last year CPI)/last year CPI)*100
Inflation rate in 2018 =((247.59-245.12)/245.12)*100
=1.00766971
=1.01%
real increase in income =nominal increase - inflation
=13.3333333-1.00766971
=12.3256636
=12.33%
the real increase in income is 12.33%
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