Consider that you were making $40,000 last year and you are making $50,000 this year. Assume...
Consider that you were making $40,000 last year and you are making $50,000 this year. Assume the price index of the CPI has increased from 100 to 130 or a change of 30%. How much has your income increased (or decreased) in real terms (purchasing power)?
Homework Answers
Nominal Increase in income = $10000
Real increase in income = $10000/1.3 = 7692.30
Thus, the income has increased by $7692.30 in real terms.
Thanks!
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