Question

9. Suppose a worker's income was $15,000 in 1960 and $45,000 in 2010. Using the GDP deflator as a price index, calculate whether the worker's real income had increased or decreased over this period.

Answer 1

$GDP\ deflector=\frac{Real\ GDP}{Nominal\ GDP}$

$=\frac{\$45000}{\$15000}\times100=300$

The worker's real income increased by 300%