Scenario 24-3
Grant Gant was a doctor in 1944 and earned $12,000 that year.His daughter,Gretta Gant,is a doctor today and she earned $210,000 in 2005.The price index was 17.6 in 1944 and 184 in 2005.
-Refer to Scenario 24-3.In real terms,Gretta Gant's income amounts to about what percentage of Grant Gant's income?

Question

Quizplus · Accepted Answer

To find the real value of Gretta Gant's income in 1944 dollars, we need to adjust for inflation using the price index.

First, we need to convert Grant Gant's 1944 income to 2005 dollars using the price index ratio:

($12,000 / 17.6) x 184 = $125,454.55

This is the equivalent value of Grant Gant's income in 2005 dollars.

To find the percentage of Gretta Gant's income in relation to Grant Gant's income, we divide:

($210,000 / $125,454.55) x 100% = 167%

Therefore, Gretta Gant's income was about 167% of what her father earned in 1944.

Scenario 24-3 Grant Gant Was a Doctor in 1944 and Earned $12,000