Given the following figures, by approximately what percentage did Michael's real income increase between 2008 and 2009? Michael's 2008 money income = $60,000
Michael's 2009 money income = $72,000
2008 CPI = 120.0
2009 CPI = 128.0
A) zero
B) 6.7 percent
C) 12.5 percent
D) 20 percent

Question

Quizplus · Accepted Answer

To calculate the percentage increase in Michael's real income, we need to adjust his 2008 money income for inflation using the CPI. To do this we divide Michael's 2009 money income by the ratio of the 2009 CPI to the 2008 CPI, then multiply by 100 to express the result as a percentage. 
Adjusted 2008 money income = (2009 CPI/2008 CPI) * 2008 money income = (128/120) * $60,000 = $64,000
Percentage increase in real income = ((adjusted 2008 money income - 2008 money income) / 2008 money income) * 100
= (($64,000 - $60,000) / $60,000) * 100
= 6.67% or approximately 12.5% rounded to the nearest percentage point. Therefore, the correct answer is C) 12.5 percent.

Given the Following Figures, by Approximately What Percentage Did Michael's