Mr. Smith earned a salary of $5,000 in in 1980 while his son earned a salary of $8,000 in 2010. If the price index for 1980 was 100 and that for 2010 was 198, whose salary was worth more? Explain your answer
What will be an ideal response?
In order to find out whose salary was higher, we need to convert Mr. Smith's salary into 2010. The value of Mr. Smith's salary in 2010 can be obtained by using the formula:
Value in 2010 = (Price Index for 2010 / Price Index for Year
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The prediction by the American Medical Association of a shortage of physicians by the year 2020 assumes
A) physicians' fees will not rise to a market clearing level. B) physicians' services will be free goods. C) physicians' services will no longer be scarce. D) physicians will be willing to work for less income.
When economists say that banks must hold a percentage of their total deposits in reserve form, what does this mean?
A) It means that banks must hold a fraction of their customers' deposits either as bank deposits at the Federal Reserve, or as vault cash, or both. B) It means that banks reserve the right to turn away customers a certain percentage of the time. C) It means that the fraction of vault cash a bank has cannot be greater than the fraction of bank deposits (it has) at the Federal Reserve. D) Essentially, it means that total reserves are greater than required reserves. E) none of the above