Real income is computed by:
A) dividing money income by the CPI and multiplying by 100.
B) dividing the CPI by money income and multiplying by 100.
C) multiplying money income by the CPI.
D) subtracting the CPI from money income.
E) dividing a dollar by the CPI and multiplying by 100.

Question

Quizplus · Accepted Answer

Real income is calculated by adjusting the nominal (or money) income for inflation to reflect the actual purchasing power. This is done by dividing the money income by the Consumer Price Index (CPI) and then multiplying by 100.

Real Income Is Computed By