Your brother graduated from college 10 years ago and started to work at a salary of $30,000.You expect to graduate this year and start to work for $47,250.If the consumer price index was 90 ten years ago and is 150 this year,who will have received the higher real starting salary?
A)You will have.
B)Your brother will have.
C)The real starting salaries will the same.
D)Your brother's salary will have been higher in nominal dollars,but your salary will have been higher in real dollars.

Question

Quizplus · Accepted Answer

To compare real salaries, adjust for inflation using the consumer price index (CPI). Your brother's real salary was $30,000 / 90 = $333.33 per CPI point. Your real salary is $47,250 / 150 = $315 per CPI point. Thus, your brother had a higher real starting salary.

Your Brother Graduated from College 10 Years Ago and Started