Recall the Application about the impact inflation has on your potential future salary and the repayment of student loans to answer the following question(s).
-According to this Application, if you earn a salary of $80,000 in the first year and all prices decrease by half in the next 5 years, what will your nominal annual salary be in 5 years?
A) $8,000
B) $10,000
C) $20,000
D) $40,000

Question

Quizplus · Accepted Answer

If all prices decrease by half in the next 5 years, the inflation rate would be -50% per year. Therefore, your nominal salary in 5 years would be $40,000. This can be calculated by multiplying your initial salary of $80,000 by (1-0.50)^5 or (0.5)^5. This is because inflation decreases the value of money over time, meaning that even though prices have decreased, your salary has also decreased in value.

Recall the Application About the Impact Inflation Has on Your