In 1931, American President Herbert Hoover was paid a salary of $75 000. The price index for 1931 is 15.2, and the price index for 2006 is 195. George W. Bush, the President in 2006, had a salary of $400 000. What is President Hoover's salary equivalent in 2006 dollars?

Question

Quizplus · Accepted Answer

We need to calculate the equivalent of Hoover's salary in 2006 dollars. To do this, we use the formula:

Equivalent salary in 2006 dollars = (Salary in base year) x (Price index in new year) / (Price index in base year)

For Hoover's salary in 1931, the equivalent salary in 2006 dollars is:

Equivalent salary in 2006 dollars = ($75 000) x (195) / (15.2)
Equivalent salary in 2006 dollars = $967 434

So, Hoover's salary in 2006 dollars is much larger than Bush's salary of $400 000, making choice C the best option.

In 1931, American President Herbert Hoover Was Paid a Salary