ruben earned a salary of $60,000 in 2001 and $80,000 in 2006. the consumer price index was 177 in 2001 and…

ruben earned a salary of $60,000 in 2001 and $80,000 in 2006. the consumer price index was 177 in 2001 and 221.25 in 2006. rubens 2001 salary in 2006 dollars is $75,000; thus, rubens purchasing power increased between 2001 and 2006. $75,000; thus, rubens purchasing power decreased between 2001 and 2006. $85,000; thus, rubens purchasing power increased between 2001 and 2006. $85,000; thus, rubens purchasing power decreased between 2001 and 2006.

ruben earned a salary of $60,000 in 2001 and $80,000 in 2006. the consumer price index was 177 in 2001 and 221.25 in 2006. rubens 2001 salary in 2006 dollars is $75,000; thus, rubens purchasing power increased between 2001 and 2006. $75,000; thus, rubens purchasing power decreased between 2001 and 2006. $85,000; thus, rubens purchasing power increased between 2001 and 2006. $85,000; thus, rubens purchasing power decreased between 2001 and 2006.

Answer

Explanation:

Step1: Calculate real - wage in 2001

Real - wage formula is $\text{Real Wage}=\frac{\text{Nominal Wage}}{\text{CPI}}\times100$. In 2001, nominal wage $W_1 = 60000$, CPI $I_1=177$. So real - wage $R_1=\frac{60000}{177}\times100\approx33898.31$.

Step2: Calculate real - wage in 2006

In 2006, nominal wage $W_2 = 80000$, CPI $I_2 = 221.25$. So real - wage $R_2=\frac{80000}{221.25}\times100\approx36158.19$.

Step3: Analyze change in purchasing power

Since $R_2>R_1$, Ruben's purchasing power increased between 2001 and 2006.

Answer:

$80,000; thus, Ruben's purchasing power increased between 2001 and 2006.