1.You got a job in year 2015 with a salary of $50,000. In 2016, you receive a $2
ID: 1134412 • Letter: 1
Question
1.You got a job in year 2015 with a salary of $50,000. In 2016, you receive a $2,000 increase in your salary. CPI in 2016 with base year in 2015 is 105. [4 points]
a.Calculate your real income in 2015 and 2016 (round off to whole dollars).
b.Calculate the percentage change in your real income between 2015 and 2016.
c.Calculate the percentage change in your nominal income between 2015 and 2016.
d.Calculate the inflation rate between 2015 and 2016.
e.Use the arithmetic trick, what was the percentage in your real income between 2015 and 2016.
f.With the $2,000 increase in your salary, were you better off in 2016 compared to 2015? Explain.
Explanation / Answer
a) Real income for 2015= $ 50000 since the base year is 2015 only.
Real income in 2016 = $49524
($52000/ 105 *100)
C) Percentage change in real income fom 2015-2016=
=Change in real income / original income * 100
= 49524 -50000 /50000 *100
= -476/ 50000 *100
= -0.952%
C) The percentage change in your nominal income between 2015 and 2016.
= 52000-50000/ 50000*100
= 4%
d) The inflation rate between 2015-2016
=CPI 2016- CPI 2015 / CPI 2015
= 105-100/100
= 5%
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