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A family spends $40,000 on living expenses. With an annual inflation rate of 6 percent, they can expect to spend approximately _______ in one year. Use Exhibit 1-A. (Round time value factors to 3 decimal places and final answer to the nearest dollar amount.) M

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Answer: $42,400

Explanation:

The family currently spends $40,000 on living expenses.

Inflation is expected to be 6% and as Inflation is used to refer to the general rise in prices, this means that the family will be spending 6% more in one year.

They will therefore be spending;

= 40,000 * (1 + 6%)

= $42,400

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