1. Suppose you’ll have an annual nominal income of $40,000 for each of the next 3 years, and the inflation rate is 5 percent per year. a. Find the real value of your $40,000 salary for each of the next 3 years. b. Suppose you have a COLA (Cost of Living Adjustment) of 5 percent per year in your contract, which raises your $40,000 salary by 5 percent for each of the next 3 years. Given the 5 percent inflation rate for each of those 3 years, what is the real value of your salary for each year?

ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
icon
Related questions
Question

1. Suppose you’ll have an annual nominal income of $40,000 for each of the next 3 years, and the
inflation rate is 5 percent per year.

a. Find the real value of your $40,000 salary for each of the next 3 years.

b. Suppose you have a COLA (Cost of Living Adjustment) of 5 percent per year in your
contract, which raises your $40,000 salary by 5 percent for each of the next 3 years. Given
the 5 percent inflation rate for each of those 3 years, what is the real value of your salary for
each year?

Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 3 steps

Blurred answer
Knowledge Booster
Ordinary and Capital gains
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
Economics
ISBN:
9780190931919
Author:
NEWNAN
Publisher:
Oxford University Press
Principles of Economics (12th Edition)
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (MindTap Course List)
Principles of Economics (MindTap Course List)
Economics
ISBN:
9781305585126
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Managerial Economics: A Problem Solving Approach
Managerial Economics: A Problem Solving Approach
Economics
ISBN:
9781337106665
Author:
Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:
Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-…
Managerial Economics & Business Strategy (Mcgraw-…
Economics
ISBN:
9781259290619
Author:
Michael Baye, Jeff Prince
Publisher:
McGraw-Hill Education