Real income in the context of Amount

Nominal gross domestic product (GDP) per capita is the total value of a country's finished goods and services (gross domestic product) divided by its total population (per capita).

Gross domestic product per capita is often used as a proxy indicator an indicator of a country's standard of living; however, this is inaccurate because GDP per capita is not a measure of personal income and does not take into account social and environmental costs and benefits. Measures of personal income include average wage, real income, median income, disposable income and gross national income (GNI) per capita.

A cost-of-living crisis is a socioeconomic situation or period of high inflation where nominal wages have stagnated while there is a sharp increase in the cost of basic goods, such as food, housing, and energy. As a result, living standards are squeezed to the point that people cannot afford the standard of living that they were previously accustomed to. Public health is threatened. The population becomes 'poorer' than it used to be in real terms. This is in contrast to a situation in which wages are rising to meet the rate of inflation and workers' standard of living remains unchanged.

During the 2020s, a cost-of-living crisis impacted many countries around the world amid global inflation. In February 2023, 3 out of 4 consumers globally were worried about the rising cost of everyday expenses. The Big Issue defines a cost of living crisis as "a situation in which the cost of everyday essentials like groceries and bills are rising faster than average household incomes". Change in average real incomes can be measured by real GNI per capita change.

The Taylor rule is a monetary policy targeting rule. The rule was proposed in 1992 by American economist John B. Taylor for central banks to use to stabilize economic activity by appropriately setting short-term interest rates. The rule considers the federal funds rate, the price level and changes in real income. The Taylor rule computes the optimal federal funds rate based on the gap between the desired (targeted) inflation rate and the actual inflation rate; and the output gap between the actual and natural output level. According to Taylor, monetary policy is stabilizing when the nominal interest rate is higher/lower than the increase/decrease in inflation. Thus the Taylor rule prescribes a relatively high interest rate when actual inflation is higher than the inflation target.

In the United States, the Federal Open Market Committee controls monetary policy. The committee attempts to achieve an average inflation rate of 2% (with an equal likelihood of higher or lower inflation). The main advantage of a general targeting rule is that a central bank gains the discretion to apply multiple means to achieve the set target.