Scenario 6-1
Grant Smith was a doctor in 1944 and made about $12 000 a year. His daughter Lisa Smith also is a doctor and she made about $175 000 in 2006. The price index in 1944 was 17.6 and the price index was 192 in 2006.
-Refer to Scenario 6-1. What is Grant's income in 2006 dollars?

Question

Quizplus · Accepted Answer

To adjust Grant Smith's income for inflation, we need to use the formula:
Adjusted income in year t = (Income in year x) x (Price index in year t / Price index in year x)
Using this formula, we can calculate Grant Smith's income in 2006 dollars as follows:
Adjusted income in 2006 = $12,000 x (192 / 17.6) = $130,909.09
Therefore, the correct answer is D) $130,909.

Scenario 6-1 Grant Smith Was a Doctor in 1944 and Made About