3. Maddie's nominal income was $33,000 in 2012. In 2013, because of her excellent work ethic, she received a raise that increased her nominal income to $35,000. Maddie knew a lot about inflation so she decided to see how much of a raise she really received. After researching the consumer price index at the Bureau of Labor Statistics web site, she found that the CPI for 2012 was 110 and that it jumped to 125 in 2013. Calculate the percent change in Maddie's real income after she was given a raise. Was she hurt or helped by this unanticipated inflation? Explain.

Question

kaylak · Answer

@21Pilots

kaylak · Answer

I got this one wrong trying to od extra credit

WonderfulFinessned · Answer

All I know is she was hurt

sillybilly123 · Answer

use the deflator they provide, in this case, CPI:

- 2012: $~ ~ \dfrac{33}{110} = 0.3$

- 2013: $~ ~ \dfrac{35}{125} = 0.28$

by CPI standards, Maddie was better-off in 2012 in *real* terms.

the percentage change in her *real* income would be:

$\dfrac{0.28 - 0.3}{0.3} \approx \color{red}{-} 6.7 \%$, bad :(