At the time of Elise's 20 year high school reunion she was earning $50,000 and the CPI was 80.Now that it is time for her to attend her 25 year high school reunion,Elise's income has risen to $80,000 and the CPI is 150.At her 25 year reunion,can Elise rightfully brag that her real income has risen since the last time she saw her former classmates five years ago?
A) Yes,Elise's real income rose during that 5 year period.
B) No,Elise's real income fell during that 5 year period.
C) No,Elise's real income remained constant during that 5 year period.
D) It is impossible to determine what happened to Elise's real income.

Question

Quizplus · Accepted Answer

Elise's real income is calculated by adjusting her nominal income for inflation using the CPI. At her 20-year reunion, her real income was $50,000 / 80 = $625. At her 25-year reunion, her real income was $80,000 / 150 = $533.33. Her real income decreased, so she cannot rightfully brag about an increase.

At the Time of Elise's 20 Year High School Reunion