Part A: Jeremy's income is $35,000. His salary increases 4.5%, and inflation is 3.5%. How much does his purchasing power change? 

Part B: Show your work to support your answer to Part A. 

Part C: Explain how to calculate whether a family has lost or gained purchasing power. 


To analyze Jeremy's situation regarding income and purchasing power, we can break it down into three parts.

### Part A: Change in Purchasing Power

1. **Calculate the new salary after the increase:**
   - **Original Salary:** $35,000
   - **Salary Increase:** $ 4.5\% $

   \[
   \text{New Salary} = 35,000 + (35,000 \times 0.045) = 35,000 + 1,575 = 36,575
   \]

2. **Calculate the inflation effect:**
   - **Inflation Rate:** $ 3.5\% $

   \[
   \text{Adjusted Salary for Inflation} = 36,575 - (36,575 \times 0.035) = 36,575 - 1,280.125 \approx 35,294.875
   \]

3. **Calculate the change in purchasing power:**
   - **Initial Purchasing Power:** $35,000
   - **Adjusted Salary for Inflation:** $35,294.875

   \[
   \text{Change in Purchasing Power} = 35,294.875 - 35,000 \approx 294.875
   \]

**Purchasing Power Change:** Jeremy's purchasing power increases by approximately **$294.88**.

---

### Part B: Work and Calculations

1. **Calculate the new salary:**
   - Increase: $ 35,000 \times 0.045 = 1,575 $
   - New Salary: $ 35,000 + 1,575 = 36,575 $

2. **Adjust for inflation:**
   - Inflation Amount: $ 36,575 \times 0.035 = 1,280.125 $
   - Adjusted Salary: $ 36,575 - 1,280.125 = 35,294.875 $

3. **Determine the change in purchasing power:**
   - Change: $ 35,294.875 - 35,000 = 294.875 $

---

### Part C: Calculating Changes in Purchasing Power

To determine if a family has lost or gained purchasing power, follow these steps:

1. **Calculate Income Increase:** Determine the percentage increase in income.
2. **Calculate Inflation Rate:** Find the inflation rate for the same period.
3. **Compare Increases:**
   - If the income increase percentage is greater than the inflation rate, purchasing power has increased.
   - If the income increase percentage is less than the inflation rate, purchasing power has decreased.
   - If they are equal, purchasing power remains the same.

**Formula Summary:**
- **Purchasing Power Change** = New Income - (Old Income × (1 + Inflation Rate))

---

If you have any questions or need further clarification, let me know! Here are some related questions to consider:

1. How does a higher inflation rate affect a worker's real wages?
2. What factors can influence salary increases?
3. How can families budget for inflation effectively?
4. What are some long-term strategies to maintain purchasing power?
5. How do different sectors experience inflation differently?

**Tip:** Always track both your income changes and inflation rates to better understand your financial health.

Part A: Jeremy's income is $35,000. His salary increases 4.5%, and inflation is 3.5%. How much does his purchasing power change? Part B: Show your work to support your answer to Part A. Part C: Explain how to calculate whether a family has lost or gained purchasing power.

Explore how to calculate changes in purchasing power using Jeremy's income of $35,000, with a 4.5% salary increase and 3.5% inflation. This problem includes detailed calculations and explanations for understanding real income adjustments.

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