Inflation is expected to be 3% in the coming year. If Mr. Gonza earned $45,000 this year, how much must he earn in the following year to keep up with inflation and maintain a balance between his income and his increasing expenditures? (Show all work.)
What will be an ideal response?
To keep up with an inflation of 3% in the coming year, Mr. Gonza must earn $46,350, which is calculated as $45,000 + (3% of $45,000). Alternatively, this can also be calculated as $45,000 × 1.03 = $46,350.
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