In 2015, the Consumer Price Index (CPI) was 238, whereas it was about 100 in 1982. Suppose that one of your parents had a job that paid $28,000 annually in 1982 and a job that paid $60,000 annually in 2015. Relative to 1982, we could say that your parent's nominal income in 2015 and that your parent's real income in 2015.

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Business

Spunky

1 June, 14:41

In 2015, the Consumer Price Index (CPI) was 238, whereas it was about 100 in 1982. Suppose that one of your parents had a job that paid $28,000 annually in 1982 and a job that paid $60,000 annually in 2015. Relative to 1982, we could say that your parent's nominal income in 2015 and that your parent's real income in 2015.

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Frankie Cordova · Answer 1

The nominal income increased from $28000 in 1982 to $60000 in 2015, resulting in an increase of $32000.

However, the real income in 2015 when compared to 1982 is only worth $25210 in 2015 (as contained below)

The implication is that $28000 in 1982 commands more baskets of commodities than $60000 earned in the year 2015.

Explanation:

Real income in 2015 = (nominal income in 2015/CPI in 2015) * CPI in 1982)

Real income in 2015=$60000/238*100

Real income in 2015=$25210