Answer:
Salary in year 2 = $54,379.31
Explanation:
<em>The Consumer price index is the weighted average of the cost of basket of good of goods and services consumed by a typical consumer in an economy. It is used to measure the rate of inflation rate.</em>
A rise in the price index implies inflation
Inflation is the increase in the general price level. Inflation erodes the value of money.
So we can determine the salary in the year 2 as follows:
2006 Salary in the base year terms=
CPI in the current year 2/CPI base year 1 × salary in the current year
190/174× 49,800 = 54,379.31
Salary in year 2 = $54,379.31
