Question

You have just graduated from college. You, your older sister, your mother, and your father are comparing the starting salaries in your first jobs. The year you each started your first job, the CPI in that year, and your starting salary are given below. Which of you started your first job with the highest real income?

Answer 1

To determine who started their first job with the highest real income, divide the starting salary by the CPI for the respective graduation year. Compare the real incomes to find the highest purchasing power.

Step-by-step explanation:

To determine who started their first job with the highest real income, we need to compare the starting salaries adjusted for inflation. Real income accounts for changes in the purchasing power of money over time. To calculate real income, we divide the starting salary by the Consumer Price Index (CPI) for the respective year. The highest real income will be the highest amount after adjusting for inflation.

Let's compare the starting salaries:

- You: Starting salary / CPI for your graduation year

- Your older sister: Starting salary / CPI for her graduation year

- Your mother: Starting salary / CPI for her graduation year

- Your father: Starting salary / CPI for his graduation year

Calculate the real income for each person and compare the values. The person with the highest real income started their first job with the highest purchasing power.