Answer:
There was an increase in real income from year 1 to year 2 by a value of 600
Explanation:
In this question, we are asked to explain what happened to real income from Year 1 to Year 2.
We calculate that as follows.
Kindly note that CPI(consumer price index) is same as price level in this case
Mathematically, real income = (income/CPI) * 100
In Year 1, real income = (30,000/120) * 100 = 25000
In Year 2, real income = (32,000/125) * 100 = 25,600
The question asked what happened to real income from year 1 to year 2. What happened is that there was an increase of 25600-25000 = 600 in real income from year 1 to year 2
