If your nominal income is $75,000 and your real income in base year prices is $60,000,what is the CPI?

Question

Quizplus · Accepted Answer

To calculate the CPI, we use the formula:
CPI = (Cost of basket in current year / Cost of basket in base year) x 100
We are given the real income in base year prices as $60,000. Let's assume that the cost of the basket of goods in the base year is $X. Therefore, the CPI can be calculated as:
75,000/X = 60,000/X * (CPI/100)
Simplifying this equation, we get: 
CPI = (75,000/60,000) * 100 = 125
Therefore, the correct choice is B.

If Your Nominal Income Is $75,000 and Your Real Income