Scenario 6-3
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 2008. The price index was 17.6 in 1944 and 184 in 2008.
-Refer to Scenario 6-3. In real terms, Josh Holloway's income amounts to about what percentage of Sue Holloway's income?

Question

Quizplus · Accepted Answer

To find out Josh Holloway's income in real terms, we need to adjust it for inflation. We first divide his income by the price index in 2008 to get the equivalent income in 1944 dollars:
$210,000 ÷ 184 = $1,141.30 (to the nearest cent)
We then compare this amount to Sue Holloway's income in 1944:
$1,141.30 ÷ $12,000 = 0.0951
Finally, we convert this to a percentage:
0.0951 × 100% = 9.51%
Therefore, Josh Holloway's income in real terms is about 167% of Sue Holloway's income in 1944 (100% + 67% = 167%).

Scenario 6-3 Sue Holloway Was an Accountant in 1944 and Earned $12,000