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 Nelson, Nicklaus, and Pavin, 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 (1983 = 100) Winnings in 2016 Dollars Year 1945 1973 1991 2016 18 Nominal Winnings (Dollars) 63,336 308,362 Golfer Byron Nelson Jack Nicklaus Corey Pavin Dustin Johnson 44.4 136.2 979,430 9,365,185 240.0 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. O True O False

Answer 1

US CPI for 2016 is 240 which makes Nominal wages of 2016 equals to real wage of 2016 which implies that we have to convert all year CPI to 2016 CPI and calculate nominal wage as per that.

As the CPI of  Byron Nelson is 18 while the CPI for 2016 is 240. CPI factors of Byron Nelson becomes 240 / 18 = 13.33 which will be multiplied by nominal wage to get real wages in 2016.

Year	Golfers	Nominal Winnings	CPI	CPI factor	Winnings in 2016 dollars
1945	Byron Nelson	63336	18	13.33	844480
1973	Jack Nicklaus	308362	44.4	5.41	1666821
1991	Corey Pavin	979340	136.2	1.76	1725709
2016	Dustin Johnson	9365185	240	1	9365185

This table makes it possible to compare winnings of all golfers in 2016 dollars.

This statement is false as Dustin Johnson with the highest PGA in nominal dollars is still the highest in real dollars.