Suppose that a person's nominal income rises from $10,000 to $12,000 and the consumer price index rises from 100 to 105. The person's real income will:

A) Fall about 20 percent

B) fall about 2 percent

C) Rise about 15 percent

D) Rise about 25 percent.

C) Rise about 15 percent

Explanation:

The computation of the increase or decrease of real income is shown below:

Initial income equals to

= Nominal income : Consumer price index

= $10,000 : 100

= 100

If it increases, then it would be

= Nominal income : Consumer price index

= $12,000 : 105

= 114.28

So, the real income is increased from

= 114.28 - 100

= 14.28 approx i. e 15 percent