Question

Would you rather live in the U.S. in 1900 with an income of $1 million per year, or in the U.S. in 2020 with an income of $50,000 per year (assume we've accounted for inflation and the incomes for both years are measures in 2020 dollars)? Explain.

Answer 1

Q) Ans:-

Step1)

The term “inflation” is defined as the overall or general increase in the price level of the nation. It is usually quoted in terms of percentage. Whereas, the income of the country depends on its GDP. High GDP economies are usually known as high-income countries.

Step2)

Per year income in US in 1990=$1,000,000

Per year income in US in 2020=$50,000

both of the above income are accounted for

inflation and are measured in 2020 dollars.

Form the above figures of income of two years; it implies that the purchasing power of the US citizen is more in 1990 as compared to the income in 2020. Thus, the real income of the US in 1990 is more than the real income of the US in 2020.

Step3)

Conclusion:

Hence, an individual will prefer to live in the US in 1990 rather than in 2020.