Suppose that in 1960 Joe's grandfather had a starting salary of $20,000 per year. In 2013 Joe graduated from college, got a job, and had a starting salary of $40,000. Which of the following is true?
A. You need to know the inflation rate in each of the two years to figure out who is better off.
B. Joe is worse off because there has been inflation since 1960.
C. You need to know the CPI value in each of the two years to figure out who is better off.
D. Joe is better off because his starting salary is higher.
Suppose that in 1960 Joe's grandfather had a starting salary of $20,000 per year. In 2013 Joe graduated from college, got a job, and had a starting salary of $40,000. Which of the following is true?
A. You need to know the inflation rate in each of the two years to figure out who is better off.
B. Joe is worse off because there has been inflation since 1960.
C. You need to know the CPI value in each of the two years to figure out who is better off.
D. Joe is better off because his starting salary is higher.
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This question studies how inflation has varied across time and space in the United States.
1984-1995 | 1995-2005 | 2005-2016 | 1985-2016 | |
All Urban Consumers | 3.4% | 2.5% | 1.9% | 2.6% |
NY Area | 3.9% | 2.7% | 1.9% | 2.8% |
Detroit Area | 3.3% | 2.6% | 1.3% | 2.4% |
A. Speculate as why the cost of living has grown differentially in the New York Metropolitan area relative to the Detroit Metropolitan area.
B. Suppose that you are a twin. And you and your twin graduated from NYU in 1984. Your twin took a job in Detroit and has remained there. And her nominal salary increased with the rate of the CPI for All Urban Consumers. You took a job in Manhattan and your nominal salary increased with the rate or the CPI of All Urban Consumers. Who is better off you or your twin? In a narrow sense? In a broad sense? Why or why not? Please provide an argument for and an argument against.