An engineer in 1950 was earning $6,300 a year. In 2015 she earned $83,000 a year

Question

An engineer in 1950 was earning $6,300 a year. In 2015 she earned $83,000 a year. However, on average, prices in 2015 were higher than in 1950. What was her real income in 2015 in terms of constant 1950 dollars? Use the data in Table 5.8. (Round your answer to 2 decimal places.)

Real income in 2015?

TABLE 5.8 The consumer price index (CPI) shows how inflation has increased the cost of a typical family's purchases CPI 25.0 29.8 39.8 86.3 133.8 174.0 219.2 236.5 Percent Change since 1950 1950 1960 1970 1980 1990 2000 2010 2015 + 19.2% 59.2 +245.2 +435.2 +596.0 +776.8 +846.0

Explanation / Answer

Real Income= Nominal income/inflation multiple

inflation multiple is here 846%

Real income in 2015=83000/8.46=9810.87

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