Assume That Nominal Income Is $35,000 and the Price Index

question 30

Essay

Assume that nominal income is $35,000 and the price index is 1.20 in year 1.In year 2, nominal income rises to $38,000 and the price index rises to 1.25.What was the percentage change in real income from year 1 to year 2? What was the absolute amount of increase in real income? Make your calculations of the percentage change in real income and the absolute change in real income using the approximation formula and using the more precise method with index numbers.

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Definitions:

Perceived Equity

An individual’s perception of the fairness of their treatment compared to others, often in relation to pay or rewards.

Distributive Justice

The perceived fairness in the distribution of resources and rewards within an organization or society.

Procedural Justice

The fairness of the processes used to make decisions, often focused on in organizational settings to ensure fairness in managerial actions.

Psychological Contract

An unwritten agreement between an employer and an employee that outlines mutual expectations, including job security, loyalty, and commitment.