Real income is found by a. multiplying nominal income by 1.03. b. dividing nominal income by 70. c. dividing nominal income by the price index (in hundredths). d. dividing the price index (in hundredths) by nominal income.

Question

Priscilla Hayden

Business

24 August, 13:54

Real income is found by a. multiplying nominal income by 1.03. b. dividing nominal income by 70. c. dividing nominal income by the price index (in hundredths). d. dividing the price index (in hundredths) by nominal income.

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Answers (1)

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Jovanny Conley · Answer 1

C. dividing nominal income by the price index (in hundredths).

Explanation:

Real income is simply the amount of money an individual has after adjusting for inflation. It is the buying power of the amount of money an individual has. It is also called real wage. It is calculated by dividing nominal income by price level.

That is,

Real income = Nominal income/Price level

Real income indicates the well being of an individual or entity better than nominal income as it gives the real measure of the amount of goods and services that can be purchased with the income.