Your brother graduated from college 10 years ago and started to work at a salary of $20,000. You expect to graduate this year and start to work for $35,000. If the consumer price index was 80 ten years ago and is 120 this year, who will have received the higher real starting salary?
A) You will have.
B) Your brother did.
C) You and your brother both will have started at the same real salary level.
D) Not enough information is supplied to answer the question.

Question

Quizplus · Accepted Answer

To determine the real salary, we need to adjust for inflation using the consumer price index (CPI). We can calculate the real starting salary for each person using the formula (starting salary/CPI) * 100.

For your brother: 
Real starting salary = (20,000/80) * 100 = 25,000.

For you: 
Real starting salary = (35,000/120) * 100 = 29,166.

Therefore, you will have received the higher real starting salary.

Your Brother Graduated from College 10 Years Ago and Started