Last year the price index rose from 150 to 156 and Joni's nominal income rose by 2%.
-Joni's real income: fell by about 4%
- increased by about 4%
- fell by about 2%
- increased by about 2%
2007-07-09 11:55:47 · 2 answers · asked by Vman 1 in Social Science ➔ Economics
- fell by about 2%
An increase of 6 is 4% of 150. So prices increased 4% and her income only increased 2%
2007-07-09 12:17:15 · answer #1 · answered by JuanB 7 · 0⤊ 0⤋
John's real income Fell by about 2%
John's nominal income this year is John's nominal income last year multiplied by 1.02/
Inflation factor is 156/ 150 = 1.04
Real income this year equals nominal income this year adjusted by inflation factor. = nomunal income this year divided by 1.04
= nominal income last year multiplied by 1.02 divided by 1.04
= approx. 0.98 of last year's income.
(For simplicity assume last year nominal income equals last year's real income by reidexing Price level as 150 = 100)
2007-07-09 12:20:57 · answer #2 · answered by sensekonomikx 7 · 0⤊ 0⤋