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During the certain period the C.L.I. goes up from 110 to 200 and the Salary of a worker is also raised from 330 to 500, then the real terms is
- a)Loss by Rs.50
- b)Loss by 75
- c)Loss by Rs. 90
- d)None of these.
Correct answer is option 'A'. Can you explain this answer?
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Verified Answer
During the certain period the C.L.I. goes up from 110 to 200 and the S...
Ans.
Given:
Cost of living index in base year = 110
Cost of living index in current year = 200
Salary of the worker in base year = 330
Salary of the worker in current year = 500
Most Upvoted Answer
During the certain period the C.L.I. goes up from 110 to 200 and the S...
Calculation of Real Terms
Inflation is the rate at which the general level of prices for goods and services is rising, and subsequently, purchasing power is falling. Inflation affects the purchasing power of money. To calculate the real terms of a worker's salary and C.L.I. during a certain period, the following steps need to be taken:
Step 1: Calculate the inflation rate
Inflation rate = ((C.L.I. at the end of the period - C.L.I. at the beginning of the period) / C.L.I. at the beginning of the period) x 100
In this case, the inflation rate = ((200 - 110) / 110) x 100 = 81.81%
Step 2: Calculate the increase in salary in nominal terms
Nominal increase in salary = 500 - 330 = Rs. 170
Step 3: Adjust the nominal increase in salary for inflation
Real increase in salary = Nominal increase in salary / (1 + inflation rate/100)
Real increase in salary = 170 / (1 + 81.81/100) = Rs. 93.09
Step 4: Determine if there is a loss or gain in real terms
Real terms = (Real increase in salary / Initial salary) x 100
Real terms = (93.09 / 330) x 100 = 28.21%
As the real terms have decreased from 100% to 28.21%, there is a loss.
Answer Explanation
Therefore, the correct answer is option 'A' - Loss by Rs.50. The worker's salary has increased from Rs. 330 to Rs. 500, but after adjusting for inflation, the real increase in salary is only Rs. 93.09. Hence, the worker has lost Rs. 50 in real terms.
Inflation is the rate at which the general level of prices for goods and services is rising, and subsequently, purchasing power is falling. Inflation affects the purchasing power of money. To calculate the real terms of a worker's salary and C.L.I. during a certain period, the following steps need to be taken:
Step 1: Calculate the inflation rate
Inflation rate = ((C.L.I. at the end of the period - C.L.I. at the beginning of the period) / C.L.I. at the beginning of the period) x 100
In this case, the inflation rate = ((200 - 110) / 110) x 100 = 81.81%
Step 2: Calculate the increase in salary in nominal terms
Nominal increase in salary = 500 - 330 = Rs. 170
Step 3: Adjust the nominal increase in salary for inflation
Real increase in salary = Nominal increase in salary / (1 + inflation rate/100)
Real increase in salary = 170 / (1 + 81.81/100) = Rs. 93.09
Step 4: Determine if there is a loss or gain in real terms
Real terms = (Real increase in salary / Initial salary) x 100
Real terms = (93.09 / 330) x 100 = 28.21%
As the real terms have decreased from 100% to 28.21%, there is a loss.
Answer Explanation
Therefore, the correct answer is option 'A' - Loss by Rs.50. The worker's salary has increased from Rs. 330 to Rs. 500, but after adjusting for inflation, the real increase in salary is only Rs. 93.09. Hence, the worker has lost Rs. 50 in real terms.
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During the certain period the C.L.I. goes up from 110 to 200 and the Salary of a worker is also raised from 330 to 500, then the real terms isa)Loss by Rs.50b)Loss by 75c)Loss by Rs. 90d)None of these.Correct answer is option 'A'. Can you explain this answer?
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