A recent article suggested that if you earn $25,000 a year today and the inflation rate continues at 3 percent per year you'll need to make $33,598 in 10 years to have the same buying power. You would need to make $44,771 if the inflation rate jumped to 6 percent. Confirm that these statements are accurate by finding the geometric mean rate of increase.

if the inflation rate is 3% over 10 years...

25,000 x 1.03^10 = 33,598

if the inflation rate is 6% over 10 years...

25,000 x 1.06^10 = 44,771

Quote:

---

Originally Posted by saeb1323

A recent article suggested that if you earn $25,000 a year today and the inflation rate continues at 3 percent per year you'll need to make $33,598 in 10 years to have the same buying power. You would need to make $44,771 if the inflation rate jumped to 6 percent. Confirm that these statements are accurate by finding the geometric mean rate of increase.

---

Calcualte 25(1.03)^10 and 25(1.06)^10 to verify. Just remember that everything is in thousands ; it's easier to omit the zeros.