You made $3000 on a part time job last year. If you expect to make the same amount this year and the inflation rate is 3%, what is your purchasing power?
P.P. = 3000 - 0.03*3000 = $2910.
this is correct. i had it on my test. other answers show 3090 which is wrong. it needs to be purchasing power amount so the answer is 2910
To calculate your purchasing power, we need to adjust your income for inflation. Here's how you can calculate it:
Step 1: Calculate the inflation-adjusted income:
Inflation-adjusted income = Current income / (1 + inflation rate)
In this case, your current income is $3000 and the inflation rate is 3% (0.03). So, plug in the values:
Inflation-adjusted income = $3000 / (1 + 0.03)
Inflation-adjusted income = $3000 / 1.03
Step 2: Calculate your purchasing power:
Purchasing power = Inflation-adjusted income / Current income
Now, substitute the value of the inflation-adjusted income ($3000 / 1.03) and the current income ($3000) into the formula:
Purchasing power = ($3000 / 1.03) / $3000
This formula simplifies to:
Purchasing power = 0.97
So, your purchasing power is 0.97, which means that, due to inflation, your income has slightly less value compared to the previous year.