If your income increased from $23,000 to $26,000 during a period when the rate of inflation was 4 percent,your real income after the raise was
A)$23,000.
B)$24,000.
C)$25,000.
D)$26,000

Question

Quizplus · Accepted Answer

To find the real income after the raise, we need to adjust the nominal income for inflation. 
Nominal income after the raise = $26,000 
Inflation rate = 4% 
Adjusted real income = Nominal income / (1 + inflation rate) 
Adjusted real income = $26,000 / (1 + 0.04) 
Adjusted real income = $25,000 
Therefore, the best choice is C, $25,000.

If Your Income Increased from $23,000 to $26,000 During a Period