Question

I really don't want to cheat, I want a full explanation of how you got the answer so that I can understand. The course material didn't go over things:

1) Compare a pay increase to the inflation rate. Assume that the inflation rate for the past year was 4 percent. You are worried that your pay is not keeping pace with your cost of living. Your average net pay this year is $2,225 per month. It was $2,176 last year. Based on this information, your average net pay per month increase is _______


2) Compare a pay increase to the inflation rate. Assume that the inflation rate for the past year was 4 percent. You are worried that your pay is not keeping pace with your cost of living. Your average net pay this year is $2,225 per month. It was $2,176 last year. Based on this information, your average net pay per month increased ______ %. (Round your answer to one decimal place.)

Answer 1

1. The average net pay per month increase is $49.

2. The average net pay increase per month is 2.3%.

This question asks us to compare the pay increase to inflation rate.

In order to make this comparison, we need to first determine the average monthly pay increase in dollars.

We calculate that by:

`Monthly pay increase in dollars = This year's monthly pay - Last year's monthly pay`

`Monthly pay increase in dollars = 2225 - 2176 = 49`

Next we determine the rate at which the monthly average increased.

We use the following formula to calculate this:

`Percentage increase in net pay = (Increase in average monthly pay)/(Last year's average monthly pay) * 100`

`Percentage increase in net pay per month = (49)/(2176) * 100`

Percentage increase in net pay per month is 2.3%.

We then compare the increase in pay per month to the inflation rate.

If the increase is pay is equal to or greater than the inflation rate, the pay is keeping pace with the cost of living. If the pay rise is less than the inflation rate, the pay is not keeping pace with the cost of living.