CBSE 2018 Class 12 Economics Exam

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Question : 5
Total: 16
Given nominal income, how can we find real income? Explain.
Solution:  
Real income can be calculated by applying the following formula :
Real Income =
Nominal‌Income
Price
‌Index
‌of
‌current
‌year
× Price Index of base year
Consider price index of base year as 100
When nominal income is given, we can convert it into real income with the help of GDP deflator.
Real Income =‌
‌ Nominal Income ‌
‌ GDP deflator ‌
×100
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