Answer to Question #35844 in Macroeconomics for raju

Question

In year 1, your annual income is $45,000 and the CPI is 143.6; in year 2, your annual income is $51,232 and the CPI is 150.7. Has your income risen, fallen, or remained constant? Explain your answer.

Answer 1

The real income (RI) is calculated as nominal income/CPI*100%
In year 1: RI = $45,000/143.6 = $31,337
In year 2: RI = $51,232/150.7 = $33,996

So, my real income has risen.