Question 1

In 1970,Professor Plum earned $12,000;in 1980,he earned $24,000;and in 1990,he earned $36,000.If the CPI was 40 in 1970,70 in 1980,and 130 in 1990,then in real terms,Professor Plum's salary was highest in

Accepted Answer

To calculate the real value of the salary, we need to adjust it for inflation using the CPI. The formula for adjusting a salary for inflation is:

Adjusted salary = (Nominal salary / CPI) * 100

Using this formula, we can calculate the adjusted salaries for each year:

Adjusted salary in 1970 = ($12,000 / 40) * 100 = $30,000
Adjusted salary in 1980 = ($24,000 / 70) * 100 = $34,285.71
Adjusted salary in 1990 = ($36,000 / 130) * 100 = $27,692.31

As we can see, the highest adjusted salary was in 1980, and the lowest was in 1990. Therefore, the correct answer is D) 1980 and lowest in 1990.

Question 2

Iggie took a university teaching job as an assistant professor in 1980 at a salary of $15,000.By 2011,she had been promoted to full professor,with a salary of $70,000.If the price index was 82 in 1980 and 225 in 2011,then what is Iggie's 1980 salary in 2011 dollars?

Accepted Answer

The answer of Iggie took a university teaching job as...

Question 3

Ruben earned a salary of $60,000 in 2001 and $80,000 in 2006.The consumer price index was 177 in 2001 and 221.25 in 2006.Ruben's 2006 salary in 2001 dollars is

Accepted Answer

To calculate Ruben's 2006 salary in 2001 dollars, we need to adjust for inflation using the consumer price index.

2006 salary in 2006 dollars = $80,000
Inflation rate = (CPI in 2006 - CPI in 2001) / CPI in 2001
Inflation rate = (221.25 - 177) / 177 = 0.2525 or 25.25%

2006 salary in 2001 dollars = 2006 salary in 2006 dollars / (1 + inflation rate)
2006 salary in 2001 dollars = $80,000 / (1 + 0.2525) = $64,000

Therefore, Ruben's 2006 salary in 2001 dollars is $64,000. This means his purchasing power increased between 2001 and 2006 since he earned more in 2006 in comparison to the inflation-adjusted currency value of 2001.

Thus the correct answer is (C).

Question 4

Scenario 24-2
The price tag on a golf ball in 1975 read $0.20,and the price tag on a golf ball in 2005 read $2.00.The CPI in 1975 was 52.3,and the CPI in 2005 was 191.3.
-Refer to Scenario 24-2.The price of a 1975 golf ball in 2005 dollars is

Accepted Answer

To find the price of a 1975 golf ball in 2005 dollars, we need to adjust for inflation using the CPI. We can use the following formula:
Price in 2005 dollars = (Price in 1975 dollars) x (CPI in 2005 / CPI in 1975)
Plugging in the values we have:
Price in 2005 dollars = $0.20 x (191.3 / 52.3) = $0.73
Therefore, the correct answer is (C) $0.73.

Question 5

Scenario 24-1
The price tag on a tennis ball in 1975 read $0.10,and the price tag on a tennis ball in 2005 read $1.00.The CPI in 1975 was 52.3,and the CPI in 2005 was 191.3.
-Refer to Scenario 24-1.The price of a 1975 tennis ball in 2005 dollars is

Accepted Answer

To calculate the price of a 1975 tennis ball in 2005 dollars, we need to adjust the 1975 price for inflation using the CPI.

First, we need to calculate the inflation rate from 1975 to 2005:
Inflation rate = ((CPI in 2005 - CPI in 1975)/CPI in 1975) x 100
Inflation rate = ((191.3 - 52.3)/52.3) x 100
Inflation rate = 265.5%

Next, we can adjust the 1975 tennis ball price for inflation using the inflation rate:
1975 price in 2005 dollars = 1975 price x (1 + inflation rate)
1975 price in 2005 dollars = $0.10 x (1 + 2.655)
1975 price in 2005 dollars = $0.37

Therefore, the price of a 1975 tennis ball in 2005 dollars is $0.37, which is represented by choice C.

Question 6

Dewey earned a salary of $75,000 in 2001 and $95,000 in 2006.The consumer price index was 177 in 2001 and 266 in 2006.Dewey's 2001 salary in 2006 dollars is

Accepted Answer

The answer of Dewey earned a salary of $75,000 in...

Question 7

Dewey earned a salary of $75,000 in 2001 and $95,000 in 2006.The consumer price index was 177 in 2001 and 266 in 2006.Dewey's 2006 salary in 2001 dollars is

Accepted Answer

To find Dewey's 2006 salary in 2001 dollars, adjust for inflation using the CPI: $95,000 * (177/266) = $63,214.29.

Question 8

Scenario 24-2
The price tag on a golf ball in 1975 read $0.20,and the price tag on a golf ball in 2005 read $2.00.The CPI in 1975 was 52.3,and the CPI in 2005 was 191.3.
-Refer to Scenario 24-2.In 1975 dollars,a 1975 golf ball cost $0.20 and a 2005 golf ball cost

Accepted Answer

To adjust the price of a 2005 golf ball to 1975 dollars, we need to use the CPI ratios. The CPI ratio in 2005/1975 is 191.3/52.3 = 3.655. Therefore, in 1975 dollars, the price of a 2005 golf ball would be $2.00/3.655 = $0.55, which is less than the price of a 1975 golf ball ($0.20). Therefore, golf balls were cheaper in 1975.

Question 9

Scenario 24-1
The price tag on a tennis ball in 1975 read $0.10,and the price tag on a tennis ball in 2005 read $1.00.The CPI in 1975 was 52.3,and the CPI in 2005 was 191.3.
-Refer to Scenario 24-1.In 1975 dollars,a 1975 tennis ball cost $0.10 and a 2005 tennis ball cost

Accepted Answer

To find the cost of a 2005 tennis ball in 1975 dollars, we need to adjust for inflation. We can use the formula: (price in later year * CPI in earlier year) / CPI in later year. Plugging in the numbers, we get: (1.00 * 52.3) / 191.3 = 0.27. Therefore, a 2005 tennis ball cost $0.27 in 1975 dollars. Since this is less than the actual price of a tennis ball in 1975, we can conclude that tennis balls were cheaper in 1975.

Question 10

Iggie took a university teaching job as an assistant professor in 1980 at a salary of $15,000.By 2011,she had been promoted to full professor,with a salary of $70,000.If the price index was 82 in 1980 and 225 in 2011,then what is Iggie's 2011 salary in 1980 dollars?

Accepted Answer

To find Iggie's 2011 salary in 1980 dollars, adjust for inflation using the price index: $70,000 * (82/225) = $25,511.

Question 11

Janelle earned a salary of $62,000 in 2004 and $80,000 in 2014.The consumer price index was 126 in 2004 and 170 in 2014.Janelle's 2004 salary in 2014 dollars is

Accepted Answer

We can use the formula for adjusting a past dollar amount to its value in a different year based on the CPI:

Adjusted Dollar Amount = Dollar Amount x (CPI in new year / CPI in old year)

Plugging in the values given:

Adjusted Dollar Amount = $62,000 x (170 / 126) = $83,651. Therefore, the best choice is D.

Question 12

Janelle earned a salary of $40,000 in 1996 and $65,000 in 2006.The consumer price index was 160 in 1996 and 266 in 2006.Janelle's 2006 salary in 1996 dollars is

Accepted Answer

We need to adjust Janelle's 2006 salary to 1996 dollars. To do this, we use the formula:

Adjusted Salary = (Original Salary) x (New CPI / Old CPI)

Plugging in the given values, we get:

Adjusted Salary = $65,000 x (160 / 266) = $39,097.74

Therefore, the answer is A) $39,097.74.

Question 13

Arlo is offered a job in Des Moines,where the CPI is 60,and a job in New York,where the CPI is 125.Arlo's job offer in Des Moines is for $48,000.How much does the New York job have to pay in order for the two salaries to represent the same purchasing power?

Accepted Answer

The answer of Arlo is offered a job in Des...

Question 14

Ruben earned a salary of $60,000 in 2001 and $80,000 in 2006.The consumer price index was 177 in 2001 and 221.25 in 2006.Ruben's 2001 salary in 2006 dollars is

Accepted Answer

To adjust Ruben's 2001 salary to 2006 dollars, we use the formula: (2001 salary) * (2006 CPI / 2001 CPI) = $60,000 * (221.25 / 177) = $75,000. Since his 2006 salary was $80,000, his purchasing power increased.

Question 15

Henri earned a salary of $50,000 in 2001 and $70,000 in 2006.The consumer price index was 177 in 2001 and 265.5 in 2006.Henri's 2006 salary in 2001 dollars is

Accepted Answer

To find Henri's 2006 salary in 2001 dollars, adjust for inflation using the consumer price index (CPI). The formula is: (2006 salary) * (2001 CPI / 2006 CPI) = $70,000 * (177 / 265.5) = $46,666.67.

Question 16

In 1949,Sycamore,Illinois built a hospital for about $500,000.In 1987,the county restored the courthouse for about $1.7 million.A price index for nonresidential construction was 24 in 1949,108 in 1987,and 126.5 in 2000.According to these numbers,the hospital cost about

Accepted Answer

The answer of In 1949,Sycamore,Illinois built a hospital for about...

Question 17

In 1970,Professor Plum earned $12,000;in 1980,he earned $24,000;and in 1990,he earned $36,000.If the CPI was 40 in 1970,60 in 1980,and 100 in 1990,then in real terms,Professor Plum's salary was highest in

Accepted Answer

To compare real salaries, adjust for inflation using the CPI. In 1970, real salary = $12,000 / 40 = $300. In 1980, real salary = $24,000 / 60 = $400. In 1990, real salary = $36,000 / 100 = $360. Thus, the highest real salary was in 1980, and the lowest was in 1970.

Question 18

Harry spent $39,000 in 2009 and $42,000 in 2014 on goods and services.The consumer price index was 220 for 2009 and 231 for 2014.Harry's 2009 spending in 2014 dollars is about

Accepted Answer

To find the 2009 spending in 2014 dollars, we need to adjust the 2009 spending based on the change in the consumer price index (CPI) from 2009 to 2014.
The CPI ratio between 2014 and 2009 is: 
CPI ratio = CPI in 2014 / CPI in 2009 = 231/220 ≈ 1.05

Therefore, the 2009 spending in 2014 dollars is:
2009 spending in 2014 dollars = 2009 spending x CPI ratio
2009 spending in 2014 dollars = $39,000 x 1.05
2009 spending in 2014 dollars = $40,950

So, the closest choice is C, $40,950.

Question 19

Henri earned a salary of $50,000 in 2001 and $60,000 in 2012.The consumer price index was 177 in 2001 and 225 in 2012.Henri's 2001 salary in 2012 dollars is

Accepted Answer

To find Henri's 2001 salary in 2012 dollars, we need to adjust the 2001 salary for inflation. We can use the formula:

Adjusted salary = (original salary) x (new CPI/old CPI)

Plugging in the numbers we get:

Adjusted salary = (50,000) x (225/177)
Adjusted salary ≈ 63,559.32

Therefore, Henri's 2001 salary in 2012 dollars is approximately $63,559.32.

Question 20

Arlo is offered a job in Des Moines,where the CPI is 80,and a job in New York,where the CPI is 125.Arlo's job offer in Des Moines is for $42,000.How much does the New York job have to pay in order for the two salaries to represent the same purchasing power?

Accepted Answer

To maintain the same purchasing power, the salary in New York should be adjusted for the difference in CPI. The formula is: New York Salary = Des Moines Salary * (New York CPI / Des Moines CPI). So, $42,000 * (125 / 80) = $65,625.

Quiz 11: Measuring the Cost of Living: Correcting Economic Variables for the Effects of Inflation