What impact will high and variable rates of inflation have on the economy? How will they influence the risk accompanying long-term contracts and related business decisions?

*10. The nominal salary paid to the president of the United States along with data for the consumer price index (CPI) are given for various years below

a. Calculate the president’s real salary measured in the purchasing power of the dollar in 2000.

b. In which year was the real presidential salary the highest?

c. The president’s nominal salary was constant between 1920 and 1940. What happened to the real salary? Can you explain why?