If you know that inflation will be 2% next year and you want to receive a 3% increase in your real salary, then you should request that your nominal salary be increased by: 5 percent.
How to solve for the nominal salary
We have to do this through the use of Fishers equation.
This equation is given as inflation + real rate.
We have to input these dates.
The rate of inflation is 2 percent
The real rate is 3 percent
Hence the nominal salary would be
2 + 3
= 5 percent.
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