Mr. Lee received a raise at a job this year, but he finds that he has less money to spend each month. What is the most likely reason for this situation?
A) The supply of goods and services has risen
B) Unemployment has dropped across the country
C) Mr. Lee is buying more expensive goods
D) Inflation was greater than Mr. Lee's raise

Question

Mr. Lee received a raise at a job this year, but he finds that he has less money to spend each month. What is the most likely reason for this situation?
A) The supply of goods and services has risen
B) Unemployment has dropped across the country
C) Mr. Lee is buying more expensive goods
D) Inflation was greater than Mr. Lee's raise

anonymous · Answer

D is the correct answer
the reason is shown through these two situations: before the raise at his job, Mr.Lee could buy a good X priced $1000 with a salary of $1000. Then, with a raise at his job of 2% and an inflation rate of 3%, he could not buy it anymore with $1020 (new salary), because the good X it has just risen to $1030, making Mr.Lee worse off than before.