Arvi,a college teaching assistant,received a raise of $800 from $18,000 to $18,800 this year.If inflation was 3 percent over the same period,which of the following is true?
A)Arvi's increase in real income was $800.
B)Arvi's increase in real income was 4.4 percent.
C)Arvi's increase in real income was $252
D)Arvi's increase in real income was $252.

Question

Quizplus · Accepted Answer

To calculate Arvi's increase in real income, we need to adjust for inflation. A 3% inflation means the prices of goods and services increased by 3%. Therefore, Arvi's purchasing power decreased by 3%, and her real increase in income is less than $800. To calculate the real increase, we need to multiply the raise by the inflation rate, which is:
$800 x 0.03 = $24
Therefore, Arvi's increase in real income is $800 - $24 = $776. However, the question only gives us the options for $252 or $776, so the correct answer is C, which is the closest option to $776. The other options are either too high or too low. It is important to pay attention to the wording of the question and choose the closest option.

Arvi,a College Teaching Assistant,received a Raise of $800 from $18,000