If the host received a 3% raise but inflation that year is 4.5%, did she actually receive a raise? Be prepared to explain your answer.
No, the host did not actually receive a raise. Inflation measures the increase in the average price level of goods and services in an economy over time. When inflation is higher than the wage increase, the purchasing power of the wage decrease.
In this scenario, the host received a 3% raise, which means her wages increased by 3%. However, the inflation rate for that year was 4.5%, meaning that the general price level of goods and services increased by 4.5%. As a result, the cost of living increased at a faster rate than the raise she received.
In practical terms, this implies that the host would need to spend more money to purchase the same goods and services as before due to the increased prices caused by inflation. Therefore, in real terms, her raise would not be sufficient to maintain her standard of living or increase her purchasing power, indicating that she did not actually receive a raise.