Answer:
r=2.9%
Explanation:;
The person real income is the income which has been adjusted for inflation and can be calculated using the below formula:
(1+r)(1+i)=(1+n)
r= real income increase%=?
n=nominal income increase%=5%
i=price level increase%=2%
(1+r)(1+2%)=(1+5%)
1+r=(1+5%)/(1+2%)
1+r=1.029
r=1.029-1
r=0.029
r=0.029*100=2.9%
