Question

Sue Holloway was an accountant in 1944 and earned $12,000 that year. Her son, Josh Holloway, is an accountant today and he earned $210,000 in 2013. The price index was 17.6 in 1944 and 218.4 in 2013.In real terms, Sue Holloway's income amounts to about what percentage of Josh Holloway's income? A. 65.2 percent B. 11.0 percent C. 70.9 percent D. 114.7 percent

Answer 1

Answer is C. 70.9 percent

Step-by-step explanation:

Real income of Sue Holloway = Nominal Income / Price index

= 12,000/17.6

= 681.82

Real income of Josh Holloway = Nominal Income / Price index = 210,000/218.4

= 961.54

Sue Holloway's income percentage as compared to Josh Holloway's income = 681.82/961.54 X 100

= 70.9 percent