(Table 1: Econia's Consumer Price Index and Salary Data, 2008

question 77

Multiple Choice

(Table 1: Econia's Consumer Price Index and Salary Data, 2008 and 2018) Table 1 provides data on Econia's Consumer Price Index (CPI) and average salaries for two years. A newspaper headline states "Well-being of Econia's workers doubles over decade." Was this headline correct? $\begin{array}{l}\text { Table 1: Econia's Consumer Price Index and Salary Data, } 2008 \text { and } 2018\\\begin{array}{|l|l|l|}\hline &{\text { Consumer Price Index }} & {\begin{array}{c}\text { Average Salary (current U.S. } \\\text { dollars) }\end{array}} \\\hline 2008 & 140 & \$ 60,000 \\\hline 2018 & 200 & \$ 120,000 \\\hline\end{array}\end{array}$

• A) Yes; average salary doubled.
• B) Yes; average salary rose twice as fast as the price level.
• C) No; salaries adjusted for the price level did not double.
• D) No; real salaries rose twice as fast as prices.

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Definitions:

Valuation Model

A financial model that determines the present value of an asset or business, based on variables such as cash flows and growth rates.

Restructuring

The process of reorganizing a company's structure, operations, or finances with the aim of increasing profitability or efficiency.

Horizon Value

The estimated value of a company or investment at the end of a specified period, taking into account all future cash flows beyond that point.

Weighted Average

A calculation that takes into account the varying degrees of importance of the numbers in a data set, based on assigned weights.