Quizzol

QUESTION:

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 2021 U.S. dollars. Using those figures, fill in the following table, making sure to round your responses to the nearest U.S. dollar.

Year	Golfer	Nominal Winnings	U.S. CPI	Winnings in 2021 Dollars
Year	Golfer	(Dollars)	(1983 = 100)	Winnings in 2021 Dollars
1945	Byron Nelson	63,336	18
1973	Jack Nicklaus	308,362	44.4
1991	Corey Pavin	979,430	136.2
2021	John Rahm	7,705,933	264.7	7,705,933

True or False: According to the previous table, 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.

True

False

ANSWER:

Year	Golfer	Nominal Winnings	U.S. CPI	Winnings in 2021 Dollars
Year	Golfer	(Dollars)	(1983 = 100)	Winnings in 2021 Dollars
1945	Byron Nelson	63,336	18	931,391
1973	Jack Nicklaus	308,362	44.4	1,838,365
1991	Corey Pavin	979,430	136.2	1,903,488
2021	John Rahm	7,705,933	264.7	7,705,933

Points:

0.67 / 1

The formula for converting dollar figures from an earlier era into 2021 dollar figures adjusts original earnings for the impact of inflation over time:

Winnings Adjusting for Inflation

=

Nominal Winnings \times \frac{Current Year Index}{Original Year Index}

You can use this formula to convert the value of Byron Nelson's 1945 winnings to 2021 U.S. dollars:

$Nelson's 1945 Winnings in 2021 Dollars$	$=$	$Winnings in 1945 \times \frac{CPI in 2021}{CPI in 1945}$
	$=$	$$63,336 \times \frac{264.7}{18}$
	$=$	$$931,391$

Performing similar calculations for Nicklaus and Pavin yields the following:

$Nicklaus's 1973 Winnings in 2021 Dollars$	$=$	$Winnings in 1973 \times \frac{CPI in 2021}{CPI in 1973}$
	$=$	$$308,362 \times \frac{264.7}{44.4}$
	$=$	$$1,838,365$

$Pavin's 1991 Winnings in 2021 Dollars$	$=$	$Winnings in 1991 \times \frac{CPI in 2021}{CPI in 1991}$
	$=$	$$979,430 \times \frac{264.7}{136.2}$
	$=$	$$1,903,488$

True or False: According to the previous table, 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.

True

False

Posted by Cleveland on September 9, 2024