Assume your salary is $2000 per month and your employer gives you a raise of 6%....
Assume your salary is $2000 per month and your employer gives you a raise of 6%. Over the next twelve months the inflation rate is 12%. Your real salary will change by
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+ 6%. |
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- 6%. |
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+12%. |
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0%. |
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- 12%. |
Homework Answers
Salary = $2,000
Nominal raise in your salary = 6%
Inflation rate = 12%
Nominal raise = Inflation rate + Real Change
Thus, Real change = 6% - 12% = -6%
Option B is correct
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