Question

Which of the following salaries will have a purchasing power of $24,035 if the inflation rate is five percent?

$25,815


$27,523


$26,000


$25,300

Answer 1

The answer would be 25,300

Answer 2

The purchasing power of $24,035 if the inflation rate is five percent is $25300 .

Explanation:

Let us assume that the purchasing power of $24,035 be y .

As given inflation rate is 5% .

(As inflation rate is inversely proportional to purchasing power .)

Assume that purchasing power be 100% .

Thus as inflation rate is increase by 5% than purchasing power decrease by 5 % .

Thus

Purchasing power = (100 - 5)%

= 95 %

95% is written in the decimal form .

`=(95)/(100)`

= 0.95

Thus the equation becomes

0.95 × y = 24035

`y = (24035)/(0.95)`

`y = (24035* 100)/(95)`

`y = (2403500)/(95)`

y = $25300

Therefore the purchasing power of $24,035 if the inflation rate is five percent is $25300 .