Answer to Question #295874 in Financial Math for Ella

Question

The consumer price index (CPI) rose from 104.5 to 117.0, while Mary's net salary rose 13.5 %. Calculate the relative real change in her salary (purchasing power) as percentage.

 

Answer 1

Rate of inflation is: $(117 - 104.5)/104.5 = 0.1196$ or 11.96%.

The relative real change in her salary (purchasing power) as percentage is:

13.5 - 11.96 = 1.54%.