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 decrease in real income was $252 percent.

Question

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 decrease in real income was $252 percent.

Quizplus · Accepted Answer

To calculate Arvi's increase in real income, we need to adjust for inflation. Inflation increased by 3%, so the purchasing power of $18,000 decreased by 3%, or $540. Therefore, Arvi's new purchasing power after the raise is $18,000 - $540 = $17,460. Arvi's actual salary increased by $800, so the increase in real income is $800 - $540 = $260. However, the question only asks for Arvi's increase in real income, not the actual amount, so the answer is C, $252.

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