Answer to Question #16027 in Macroeconomics for irina

Question

Suppose you currently live and work in Cleveland,
earning a salary of $60,000 per year and spending
$10,000 for housing. You just heard that you will be
transferred to a city in California where housing is 50
percent more expensive. In negotiating a new salary,
your objective is to keep your real income constant.
Your new target salary is $__________.

Answer 1

New housing cosy = $10,000*1.5=$15,000
permanent income =
$60,000-$10,000=$50,000
New salary = $50,000+15,000=65,000