In April 2013, the mean salary for a nurse manager with a bachelor’s degree was
ID: 3221472 • Letter: I
Question
In April 2013, the mean salary for a nurse manager with a bachelor’s degree was $89,673. The Consumer Price Index for April 2013 was 232.531 (1982–84 = 100). The mean annual salary for a nurse in the base period of 1982–84 was $19,800.
What was the real income of the nurse in April 2013? (Round your answer to the nearest whole number.)
How much had the mean salary increased? (Round your answer to the nearest whole number.)
In April 2013, the mean salary for a nurse manager with a bachelor’s degree was $89,673. The Consumer Price Index for April 2013 was 232.531 (1982–84 = 100). The mean annual salary for a nurse in the base period of 1982–84 was $19,800.
Explanation / Answer
Nurse earned $19,800 annually in 1982-84 and earned $89,673 annually in April 2013. To ascertain how real income has changed over this period, we need to calculate 1982-84 salary in terms of April 2013 prices. The Consumer Price Index (CPI) for all items in 1982-84 was 100, while the CPI for April 2013 was 232.531. To continue, multiply $19,800 (1982-84 salary) by the CPI in April 2013. The result is $4,604,113.8. Then, divide this number by the CPI from 1982-84 to get $46,041.138. This means nurse's 1982-84 salary is worth $46,041.138 in April 2013 taking inflation into account.
To calculate the change in purchasing power, subtract the purchasing power of old salary from the salary to which we are comparing it. In this case, $89,673 - $46,041.138 = $43,631.862. In terms of real income, nurse earns $43,631.862 more in April 2013 than he/she did in 1982-84. To express this change as a percentage, divide the difference by the purchasing power of old wage. In this case, $43,631.862/$46,041.138 indicates nurse's real income increased by 0.947671 or 94.7671% from 1982-84 to April 2013.
Answers: Real Income in 2013 = $46,041 and Increase in mean salary = $43,632