You receive a 5 percent raise in your salary. The inflation rate is 6 percent. The purchasing power of your salary has

Question

Quizplus · Accepted Answer

While your salary has increased by 5%, the inflation rate is higher at 6%. Thus, the cost of goods and services you could previously afford with your salary has increased by 6%, negating any increase in salary. This means the purchasing power of your salary has actually decreased by 1%.

You Receive a 5 Percent Raise in Your Salary