Over a period of years, engineers' salaries have increased at a rate of 10.5% per year. if inflation has been 6.5% per year, what is the real, inflation-adjusted salary increase?

Question

Conor Case

Business

1 December, 02:11

Over a period of years, engineers' salaries have increased at a rate of 10.5% per year. if inflation has been 6.5% per year, what is the real, inflation-adjusted salary increase?

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Answers (1)

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Yareli Fleming · Answer 1

To answer this item, we let x be the salary last year.

The increase of 10.5% in the salary per year, will give us an expression of 1.105x for the salary this year.

For the salary to keep up with the inflation, we multiply the inflation rate and the salary.

= 1.065x

To determine the inflation-adjusted salary increase, we subtract the two expressions.

inflation-adjusted salary increase = 1.105x - 1.065x

= 0.04x

Thus, the inflation-adjusted salary increase is only 4%.