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 three percent, what is your purchasing power?

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Answer 1 · 2018-08-12T14:07:50

New spending power is 97.087% of this year
(to 3 decimal places)

Assumption: The inflation rate of 3% is applied to the cost of everything (not so in real life).

So the change is:

$$ x \leftarrow Last year's cost$ $$x larr" Last year's cost"$

This years cost:

$$ x + $ (\frac{3}{100} \times x) = $ x (1 + \frac{3}{100}) = $ x (\frac{103}{100})$ $$x+$(3/100xx x) = $x(1+3/100)=$x(103/100)$

$$ 3000 (\frac{103}{100}) = $ 3090$ $$3000(103/100) = $3090$

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Thus the new $ul("'spending power'")$ is $($3000)/($3090)$ of this year

Expressing this as a percentage of last years 'spending power' we have:

$(cancel($)3000)/(cancel($)3090)xx100% = 97.087378...%$

New spending power is: 97.087% to 3 decimal places