Your Grandfather Tells You That He Earned $7,000/year in His

question 123

Multiple Choice

Your grandfather tells you that he earned $7,000/year in his first job in 1961.You earn $35,000/year in your first job in 2011.You know that average prices have risen steadily since 1961.You earn

• A) 5 times as much as your grandfather in terms of real income.
• B) more than 5 times as much as your grandfather in terms of real income.
• C) less than 5 times as much as your grandfather in terms of real income.
• D) less than 5 times as much as your grandfather in terms of nominal income.

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Definitions:

Misery Index

The misery index is an economic indicator created by adding the unemployment rate to the inflation rate, designed to measure the health of an economy.

Prime Rate

The interest rate that commercial banks charge their most creditworthy customers, often used as a reference rate for various types of loans.

Inflation

The advancement rate at which the general price levels of goods and services elevate, diminishing spending power.

CPI

This index, known as the Consumer Price Index, evaluates the weighted average cost of a collection of goods and services bought by consumers, covering areas like food, medical care, and transportation.