# Economics home work help.?

Last year the price index rose from 150 to 156 and Joni's nominal income rose by 2%.

-Joni's real income: fell by about 4%

- increased by about 4%

- fell by about 2%

- increased by about 2%

- fell by about 2%

An increase of 6 is 4% of 150. So prices increased 4% and her income only increased 2%

John's real income Fell by about 2%

John's nominal income this year is John's nominal income last year multiplied by 1.02/

Inflation factor is 156/ 150 = 1.04

Real income this year equals nominal income this year adjusted by inflation factor. = nomunal income this year divided by 1.04

= nominal income last year multiplied by 1.02 divided by 1.04

= approx. 0.98 of last year's income.

(For simplicity assume last year nominal income equals last year's real income by reidexing Price level as 150 = 100)

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-Joni's real income: fell by about 4%

- increased by about 4%

- fell by about 2%

- increased by about 2%

**Answer:**- fell by about 2%

An increase of 6 is 4% of 150. So prices increased 4% and her income only increased 2%

John's real income Fell by about 2%

John's nominal income this year is John's nominal income last year multiplied by 1.02/

Inflation factor is 156/ 150 = 1.04

Real income this year equals nominal income this year adjusted by inflation factor. = nomunal income this year divided by 1.04

= nominal income last year multiplied by 1.02 divided by 1.04

= approx. 0.98 of last year's income.

(For simplicity assume last year nominal income equals last year's real income by reidexing Price level as 150 = 100)

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