Consider that you were making $40,000 last year and you are making $50,000 this year. assume the price index of the cpi has increased from 100 to 120 or a change of 20%. how much has your total income increased (or decreased) in real terms (purchasing power)?

The real income will be $41,666.67.

The total income has increased by $1,666.67.

Explanation:

The salary in the last year is $40,000.

The salary in the current year is $50,000.

The CPI in the last year was 100.

The CPI in this period is 120.

The real income will be

=

=

= $41,666.67

The total income has increased by

= $41,666.67 - $40,000

= $1,666.67

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