Question

If nominal income is Rs 500 and price index is 125, calculate real income.

Answer 1

Given:

Nominal Income = Rs. 500

Price Index = 125

`"Real Income"="Nominal Income"/"Price Index of Current Year" xx "Price Index of Base Year"`

Consider that Price Index of base year as 100

`"Real Income" = 500/125xx100`

Real Income = 4 × 100

Real Income = 400