Last year, Tatum's nominal income rose by 4.6 percent and the price level rose by 1.6 percent. We can conclude that last year Tatum's real income

Question

Quizplus · Accepted Answer

To calculate Tatum's real income, we need to adjust his nominal income for inflation. We can do that using the formula:

Real income = Nominal income / Price level

Substituting in the values given, we get

Real income = (1 + 0.046) / (1 + 0.016) * 100% = 103% / 101.6% * 100% = 1.014 * 100% = 101.4%

So Tatum's real income rose by approximately 3%. Therefore, the correct choice is C.

Last Year, Tatum's Nominal Income Rose by 4