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a_sh-v [17]
3 years ago
13

Suppose that a person's nominal income rises from $10,000 to $12,000 and the consumer price index rises from 100 to 105. The per

son's real income will:
A) Fall about 20 percent

B) fall about 2 percent

C) Rise about 15 percent

D) Rise about 25 percent.
Business
1 answer:
Kazeer [188]3 years ago
8 0

Answer:

C) Rise about 15 percent

Explanation:

The computation of the increase or decrease of real income is shown below:

Initial income equals to

= Nominal income ÷ Consumer price index

= $10,000 ÷ 100

= 100

If it increases, then it would be

= Nominal income ÷ Consumer price index

= $12,000 ÷ 105

= 114.28

So, the real income is increased from

= 114.28 - 100

= 14.28 approx i.e 15 percent

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