Question

3. Comparing salaries from different times 

Consider golfers who led the Professional Golfers' Association of America (PGA) in winnings at different points in time. Note that the winnings are nominal figures (unadjusted for inflation). 

To convert the original earnings of Palmer, Trevino, and Norman, use the formula for converting dollar figures from an earlier era into year 2016 U.S. dollars. Using those figures, fill in the following table, making sure to round your responses to the nearest U.S. dollar

True or False: According to the previous table, the golfer with the highest PGA Winnings in nominal dollars is not the same as the golfer with the highest PGA winnings after adjusting for inflation.

• True 

• False

Answer 1

Calculate the winnings of Arnold Palmer in 2016 dollars -

Winnings in 2016 dollars = Nominal winnings * [CPI in 2016/CPI in 1963]

Winnings in 2016 dollars = $128,230 * [240/30.6]

Winnings in 2016 dollars = $1,005,725

Thus,

The winnings of Arnold Palmer in 2016 dollars was $1,005,725

Calculate the winnings of Lee Trevino in 2016 dollars -

Winnings in 2016 dollars = Nominal winnings * [CPI in 2016/CPI in 1970]

Winnings in 2016 dollars = $157,037 * [240/38.8]

Winnings in 2016 dollars = $971,363

Thus,

The winnings of Lee Trevino in 2016 dollars was $971,363

Calculate the winnings of Greg Norman in 2016 dollars -

Winnings in 2016 dollars = Nominal winnings * [CPI in 2016/CPI in 1986]

Winnings in 2016 dollars = $653,296 * [240/109.6]

Winnings in 2016 dollars = $1,430,575

Thus,

The winnings of Greg Norman in 2016 dollars was $1,430,575

Following is the complete table -

It can be seen that from the above table that the winnings of Dustin Jhonson is highest both in nominal terms and in 2016 dollars (adjusted for inflation).

Thus, the golfer with highest PGA winnings in nominal dollars is the same as the golfer with highest PGA winnings after adjusting for inflation.

Hence, the given statement is False.