The price index for a country is 125, while a person's money income is Rs. 50,000. What is the real income at base-period prices?
Correct answer: B. Rs. 40,000
- A. Rs. 38,000
- B. Rs. 40,000
- C. Rs. 42,500
- D. Rs. 45,000
Explanation
Real income equals money income divided by the price index expressed as a ratio: 50,000 ÷ 1.25 = Rs. 40,000. Dividing by 125 directly would incorrectly ignore the index's base of 100.
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