Suppose your salary in 2014 is $50,000. Assuming an annual inflation rate of 3%, what salary do you need to earn in 2018 in order to have the same purchasing power? (Round your answer to two decimal places.)


To calculate the salary you would need in 2018 to have the same purchasing power as in 2014, we need to account for the effect of inflation over the 4-year period. The formula to adjust for inflation is:

\[
\text{Future Salary} = \text{Current Salary} \times (1 + \text{Inflation Rate})^n
\]

Where:
- **Current Salary** is $50,000,
- **Inflation Rate** is 3% or 0.03,
- **n** is the number of years, which is 4 (from 2014 to 2018).

Now, let's calculate:

\[
\text{Future Salary} = 50,000 \times (1 + 0.03)^4
\]

\[
\text{Future Salary} = 50,000 \times (1.03)^4
\]

\[
\text{Future Salary} = 50,000 \times 1.125509
\]

\[
\text{Future Salary} = 56,275.45
\]

So, to maintain the same purchasing power in 2018, you would need to earn **$56,275.45**.

Would you like further details or have any questions?

Here are 5 related questions to expand on this concept:
1. How would the required salary change if the inflation rate was 4% instead of 3%?
2. What would the salary be if the period was 5 years instead of 4 years?
3. How would a deflation rate of 1% impact the salary calculation?
4. What if the inflation rate varied each year? How would you calculate the necessary salary?
5. How does inflation impact retirement savings over time?

**Tip:** It's always good to keep track of inflation and adjust your savings or income goals accordingly to maintain your purchasing power!

Suppose your salary in 2014 is $50,000. Assuming an annual inflation rate of 3%, what salary do you need to earn in 2018 in order to have the same purchasing power? (Round your answer to two decimal places.)

Learn how to calculate the salary needed in 2018 to maintain the same purchasing power as a $50,000 salary in 2014, accounting for a 3% annual inflation rate. The solution applies the exponential growth formula for inflation adjustments over a 4-year period. Suitable for high school students in Grades 10-12.

Math Problem Statement

Solution

Ask a new question for Free

By Image

Math Problem Analysis

Mathematical Concepts

Formulas

Theorems

Suitable Grade Level

Related Recommendation