Assume the CPI increases from 110 to 121,and Manny's nominal income increases from $100,000 to $120,000 over the same period.Manny's real income has
A)Increased by approximately 12 percent.
B)Increased by approximately 9 percent.
C)Decreased by approximately 8 percent.
D)Remained the same.

Question

Quizplus · Accepted Answer

Manny's real income is calculated by adjusting his nominal income for inflation. The CPI increase from 110 to 121 represents an inflation rate of approximately 10% (121/110 - 1). Manny's nominal income increased by 20% (120,000/100,000 - 1). Therefore, his real income increased by approximately 9% (20% nominal increase - 10% inflation rate).

Assume the CPI Increases from 110 to 121,and Manny's Nominal