Assume your salary is $2000 per month and the expectation is that over the next twelve months inflation will be 6%.In order to prevent a drop in your real salary over the year,your employer would have to agree to change your nominal salary by

Question

Quizplus · Accepted Answer

Inflation will decrease the purchasing power of your salary. To prevent a drop in your real salary over the year, your nominal salary should increase by the expected rate of inflation, which is 6%. Therefore, your employer would have to agree to change your nominal salary by +6%.

Assume Your Salary Is $2000 Per Month and the Expectation