A person's annual earnings rise from $100,000 to $125,000, while the inflation rate rises by 3 percent. As a result, his/her real income increases by 25 percent.

Name: A person's annual earnings rise from $100,000 to $125,000, while the inflation rate rises by 3 percent. As a result, his/her real income increases by 25 percent.
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The nominal income increases by 25 percent, but the real income increase would be less than 25 percent after adjusting for a 3 percent inflation rate.

A Person's Annual Earnings Rise from $100,000 to $125,000, While