Suppose that your income during Year X was $50,000,and the CPI for Year X was 150 (base year = Z.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 $3,333.33.
C) Unchanged.
D) Decreased by $3,333.33.
E) Decreased by $5,000.

Question

Quizplus · Accepted Answer

To calculate the real income, we need to adjust the current income for inflation using the CPI ratio. 
Real Income = (Nominal Income/CPI) x 100

Real Income in Year X = ($50,000/150) x 100 = $33,333.33

Therefore, the real income has increased from $30,000 in Year Z to $33,333.33 in Year X, resulting in an increase of ($33,333.33-$30,000) = $3,333.33. Hence, choice B is correct.

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