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 1970,60 in 1980,and 100 in 1990,then in real terms,Professor Plum's salary was highest in
A)1980 and lowest in 1970.
B)1980 and lowest in 1990.
C)1990 and lowest in 1970.
D)1990 and lowest in 1980.

Question

Quizplus · Accepted Answer

To compare real salaries, adjust for inflation using the CPI. In 1970, real salary = $12,000 / 40 = $300. In 1980, real salary = $24,000 / 60 = $400. In 1990, real salary = $36,000 / 100 = $360. Thus, the highest real salary was in 1980, and the lowest was in 1970.

In 1970,Professor Plum Earned $12,000;in 1980,he Earned $24,000;and in 1990,he