Question

You earned $30,000 in 1990, and your salary rose to $80,000 in 2011. If the CPI rose from 82 to 202 between 1990 and 2011, which of the following is true?A) There was deflation between 1990 and 2011.B) The purchasing power of your salary fell between 1990 and 2011.C) The purchasing power of your salary remained constant between 1990 and 2011.D) The purchasing power of your salary increased between 1990 and 2011.

Answer 1

D) The purchasing power of your salary increased between 1990 and 2011.

Step-by-step explanation:

We can see that your salary rose 266.7% from 1990 to 2011, because:

80,000 x 100% / 30,000 = 266.7%

The CPI instead, rose 246.3% from 1990 to 2011, because:

202 x 100% / 82 = 246.3%

Because your salary rose more than the CPI, we can affirm that the purchasing power of your salary increased between 1990 and 2011.