Suppose that your income during Year X was $50,000, and the CPI for Year X was 150 (base year = Z=100). Back in Year Z your income was $30,000. Has your real income increased or decreased from Z to year X? By how much?
A) Increased by $5,000.
B) Increased by $3,333.
C) Decreased by $5,000.
D) Decreased by $3,333.

Question

Quizplus · Accepted Answer

To calculate the real income, we need to use the formula:
Real Income = (Nominal Income / CPI) x 100
Real Income in Year Z = (30,000 / 100) x 100 = 30,000 
Real Income in Year X = (50,000 / 150) x 100 = 33,333.33
The real income has increased by $3,333.

Suppose That Your Income During Year X Was $50,000, and the CPI