Question

If Homer’s nominal income in 1989 was $21,000, what was most likely his nominal income in 2011, assuming he did not advance in his career through promotion?

Answer 1

To determine Homer's nominal income in 2011, we need to take into account the effects of inflation. By using the Consumer Price Index (CPI) and assuming an inflation rate of 2% per year, we can calculate his nominal income in 2011 to be $31,185.

Step-by-step explanation:

To determine Homer's nominal income in 2011, we need to take into account the effects of inflation. Inflation is the general increase in prices over time, which reduces the purchasing power of money. To adjust for inflation, we can use the Consumer Price Index (CPI) to calculate the inflation rate between 1989 and 2011.

Let's assume that the inflation rate between 1989 and 2011 was 2% per year. To calculate Homer's nominal income in 2011, we need to multiply his income in 1989 by the cumulative inflation rate from 1989 to 2011. The cumulative inflation rate can be calculated using the formula:

Cumulative inflation rate = (1 + Inflation rate)Number of years

Assuming a 2% inflation rate per year for 22 years (2011 - 1989), the cumulative inflation rate would be:

Cumulative inflation rate = (1 + 0.02)22 = 1.485

To find Homer's nominal income in 2011, we multiply his income in 1989 ($21,000) by the cumulative inflation rate:

Nominal income in 2011 = $21,000 * 1.485 = $31,185

Answer 2

asuming its per year the answer would be 462,000