A consumer's nominal income rises from ₦200,000 to ₦220,000 over a year. During the same period the Consumer Price Index (CPI) increases from 120 to 132.

(i) Compute the consumer's real‑income growth rate (as a percentage) for the year.
(ii) If the consumer wishes to keep the same real purchasing power next year and expects the CPI to rise by 8 %, what nominal income should they target? Give the answer rounded to the nearest thousand naira.

Question

A consumer's nominal income rises from ₦200,000 to ₦220,000 over a year. During the same period the Consumer Price Index (CPI) increases from 120 to 132.

(i) Compute the consumer's real‑income growth rate (as a percentage) for the year.
(ii) If the consumer wishes to keep the same real purchasing power next year and expects the CPI to rise by 8 %, what nominal income should they target? Give the answer rounded to the nearest thousand naira.

Accepted Answer

0% real growth; target income = ₦238,000

Neco 2022 Economics Question 43

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