Question

Help please!

Bart had an income of $38,250 last year. If the inflation rate is 4.5%, what is his purchasing power?

A. $33,614.85
B. $34,543.75
C. $34,998.15
D. $36,528.75
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Answer 1

His purchasing power is B. $34,543.75

Answer 2

Answer:  D) $36,528.75

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Explanation:

Positive inflation eats away at the purchasing power of money.

If inflation is 4.5%, then the purchasing power goes down by 4.5% meaning his purchasing power is 100% - 4.5% = 95.5% of what it used to be.

95.5% of $38,250 = 0.955*38250 = 36,528.75

So his purchasing power is $36,528.75