Scenario 6-1
Grant Smith was a doctor. In 1944, he made $12,000. His daughter, Lisa Smith, is also a doctor. Last year she made $275,000. The price index in 1944 was 17.6 and the price index last year was 200.
-Refer to Scenario 6-1. What is Grant's 1944 income in last year's dollars?

Question

Quizplus · Accepted Answer

To calculate Grant's 1944 income in last year's dollars, we need to adjust for inflation using the price indexes. First, we use the following formula to adjust the 1944 income for inflation:
Adjusted Income = (Nominal Income × Current Price Index) ÷ Historical Price Index
Using the given information, we get:
Adjusted Income = ($12,000 × 200) ÷ 17.6 = $136,363.64
Therefore, the best choice is D.

Scenario 6-1 Grant Smith Was a Doctor. in 1944, He Made $12,000