ECN502 Chapter Notes -Real Income
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Practice questions (2: suppose an economy"s real gdp is ,000 in year 1 and ,000 in year 2. Assume that population was 100 in year 1 and 105 in year 2. Real gdp grew by 10% (,000/,000 x 100). Real gdp per capita is (,000/100) in year. The growth in real gdp per capita is 4. 76% [(. 81 - Inflation is the sustained increase in the general level of prices in an economy. It is measured as the growth rate in price level as calculated by the consumer price index (cpi): calculate the rate of inflation between year 1 and year 2. The price index in year 1 was 124. 0 and. Inflation is 5. 4% [(130. 7 - 124. 0)/124. 0 x 100]: explain the difference between real and nominal income. Nominal income is the number of dollars received as wages, rent, interest, or profits. Real income is the purchasing power of nominal income. Real income is determined by dividing nominal income by 1.
