Question

Your current salary is $59,904 per year. If the consumer price index increases from 136 to 152 then what is your cost of living adjusted income? Enter a number rounded to two decimal places.

Answer 1

The cost of living adjusted income is $52859.29

Step-by-step explanation:

The cost of living adjusted income is the salary adjusted for inflation rate.

The level of inflation is denoted by

(Current CPI-Base CPI)/Base CPI

(152-136)/136=11.76% reduction in salary in actual terms

Cost of living Adjusted Income=current salary-(current salary*inflation rate)

Cost of living adjusted income=$59904-($59904*11.76%)

Cost of living adjusted income=$52,859.29

Inflation brings about a situation where the purchasing power is reduced as the same amount of company commands less of an output

Finally, inflation is when too much money chases too few goods

Answer 2

Cost of living adjusted income = $59904 + (152%-136%)*$59904

= $59904 + 16%*59904

= $59904 +$9584.64

= $69488.64

Step-by-step explanation:

Cost of living adjusted income is an increase in income that is exactly equal to the increase in CPI so to help a consumer to be able to purchase products and maintain cost of living.