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. U.S. CPI (1983100) Winnings in 2016 Dollars 30.5 Year 1963 1970 1986 2016 Golfer Arnold Palmer Lee Trevino Greg Norman Dustin Johnson Nominal Winnings (Dollars) 128,230 157,037 653,296 9,365,185 38.8 Micro 109.6 240.0 9,365,185 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

Ans:

1)

Calculation of winnings in 2016 dollars

Arnold Palmer = Nominal winnings * (CPI in 1983 / CPI in 1963) * (CPI in 2016 / CPI in 1983)

                        = $128,230 * (100 / 30.6) * (240 / 100)

                        = $1,005,725.5

Lee Trevino = Nominal winnings * (CPI in 1983 / CPI in 1970) * (CPI in 2016 / CPI in 1970)

                    = $157,037 * (100 / 38.8) * (240 / 100)

                     = $971,362.9

Greg Norman = Nominal winnings * (CPI in 2016 / CPI in 1986)  

                       = $653, 296 * (240 / 109.6)

                       = $1,430,575

2) False

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