Question

In 1970, professor plum earned $12,000; in 1980, he earned $24,000; and in 1990, he earned $36,000. if the cpi was 40 in 1970, 70 in 1980, and 130 in 1990, then in real terms, professor plum's salary was highest in

Answer 1

CPI stands for consumer price index which takes the average change in time of prices being paid on consumer goods and services and compares them to wage and current market. Even though Professor Plum was making more money as years passed, bills and taxes went up because items cost more to purchase so it had to become relevant to the cost of living. Based on this scenario, Professor Plum’s salary was the highest in the 1970’s because the CPI was a lot lower so less money was taken for bills and tax purposes.

Answer 2

Based on the scenario above, it is likely that Professor Plum’s salary that is considered to be at its highest was at 1970 whereas the lowest was during the 1990 and this could be based from CPI in which will evaluate his salary from where it became highest and lowest.