Gulten started her career with an annual salary of $82,000 in 2006.Five years later,in 2011,her salary had increased to $85,000 a year.If the values of the CPI (with a base of 1982-1984)for 2006 and 2011 are 201.6 and 224.9,respectively,compute the increase in Gulten's real income.
A)-7.08 percent
B)3.66 percent
C)15.68 percent
D)92.92 percent

Question

Quizplus · Accepted Answer

To calculate the increase in Gulten's real income, we need to adjust her nominal income for inflation. We can use the following formula:
Real income = Nominal income / CPI * 100

For 2006:
Real income = 82,000 / 201.6 * 100 = 40,685.71

For 2011:
Real income = 85,000 / 224.9 * 100 = 37,833.26

The increase in Gulten's real income is calculated as:
(Real income in 2011 - Real income in 2006) / Real income in 2006 * 100

= (37,833.26 - 40,685.71) / 40,685.71 * 100

= -7.08%

Therefore, the best choice is A) -7.08 percent.

Gulten Started Her Career with an Annual Salary of $82,000