Assume Your Uncle Recorded His Salary History During a 40-Year

question 12

Multiple Choice

Assume your uncle recorded his salary history during a 40-year career and found that it had increased 10-fold.If inflation averaged 4% annually during the period,then over his career his purchasing power:

• A) remained on par with inflation.
• B) increased by nearly 1% annually.
• C) increased by nearly 2% annually.
• D) decreased.

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Definitions:

Heuristics

Mental shortcuts or rules of thumb that facilitate fast and efficient decision-making, although not always leading to the perfect solution.

Elimination By Aspects

A decision-making approach in which alternatives are evaluated against criteria that have been ranked according to importance.

Additive Strategy

A problem-solving technique that involves systematically adding all possible elements together to find a solution.

Representativeness Heuristic

A cognitive shortcut that involves judging the probability of an event by how much it resembles what we consider to be a typical example of that event.