Scenario 24-3
Sue Holloway was an accountant in 1944 and earned $12,000 that year.Her son,Josh Holloway,is an accountant today and he earned $210,000 in 2013.The price index was 17.6 in 1944 and 218.4 in 2013.
-Refer to Scenario 24-3.In real terms,Sue Holloway's income amounts to about what percentage of Josh Holloway's income?

Question

Quizplus · Accepted Answer

To compare real incomes, adjust for inflation using the price index. Sue's real income in 2013 dollars is ($12,000 * 218.4 / 17.6) = $148,909.09. Josh's income is $210,000. Sue's income as a percentage of Josh's is ($148,909.09 / $210,000) * 100% ≈ 70.9%.

Scenario 24-3 Sue Holloway Was an Accountant in 1944 and Earned $12,000