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
A)1970 and lowest in 1980.
B)1970 and lowest in 1990.
C)1980 and lowest in 1970.
D)1980 and lowest in 1990.

Question

Quizplus · Accepted Answer

To calculate the real value of the salary, we need to adjust it for inflation using the CPI. The formula for adjusting a salary for inflation is:

Adjusted salary = (Nominal salary / CPI) * 100

Using this formula, we can calculate the adjusted salaries for each year:

Adjusted salary in 1970 = ($12,000 / 40) * 100 = $30,000
Adjusted salary in 1980 = ($24,000 / 70) * 100 = $34,285.71
Adjusted salary in 1990 = ($36,000 / 130) * 100 = $27,692.31

As we can see, the highest adjusted salary was in 1980, and the lowest was in 1990. Therefore, the correct answer is D) 1980 and lowest in 1990.

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