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Ivenika [448]
1 year ago
12

In 2017 Sabrina earned an annual salary of $100,000 as an engineer. In 2018, her income rose to $105,000. The inflation rate in

2018 was 2%. How did Sabrina’s nominal income and real income change in 2018 compared to 2017?
Business
1 answer:
blagie [28]1 year ago
3 0

Answer:

Change in Nominal income = 5%

Change in real income = 2.9 %

Explanation:

<em>Real income </em><em>is the amount of basket of goods and services that can be actually purchased . It is the nominal income adjusted for inflation.</em>

<em>Real income = (CPi in base base year/ CPI current year) × Nominal income </em>

Real income for Sabrina

= (100/102) × 105,000

= 102,941.1765

<em>Change in real income</em> = (102,941.1765 -100,000)/100,000

= 2.9 %

<em>Change in Nominal income</em> = (105,000-100,000)/100,000

= 5%

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