A worker has a nominal income of $10,000 in the year 2000, and the Consumer Price Index (CPI) for 2000 was 100. If the worker's nominal income remained unchanged in 2001 but the real income increased to $10,050, then the CPI for 2001 is _____, and there has been _____ in the economy.
A) 100.50; deflation
B) 100.50; inflation
C) 99.50; deflation
D) 99.50; inflation

Question

Quizplus · Accepted Answer

Real income is calculated as (Nominal Income / CPI) * 100. If real income increases while nominal income remains the same, it means the CPI has decreased, indicating deflation. The CPI for 2001 is calculated as (10000 / 10050) * 100 = 99.50.

A Worker Has a Nominal Income of $10,000 in the Year