Your grandfather tells you that he earned $5,000/year in his first job in 1971.You earn $45,000/year in your first job in 2017.You know that average prices have risen steadily since 1961.You earn
A)9 times as much as your grandfather in terms of real income.
B)more than 9 times as much as your grandfather in terms of real income.
C)less than 9 times as much as your grandfather in terms of real income.
D)less than 9 times as much as your grandfather in terms of nominal income.
E)more than 9 times as much as your grandfather in terms of nominal income.

Question

Quizplus · Accepted Answer

Inflation has increased prices since 1971, so the purchasing power of $5,000 in 1971 was much higher than $5,000 in 2017. Therefore, in terms of real income, you earn less than 9 times as much as your grandfather.

Your Grandfather Tells You That He Earned $5,000/year in His