You bought a house for $130,000 in 1999. The previous owner paid $50,000 for the house in 1980. Comparing the converted cost, who paid more for the house? (Assume the 1999 CPI is 166.2 and the 1980 CPI is 82.4.)
A) You paid much more.
B) The previous owner paid much more.
C) You both paid approximately the same amount.

Question

Quizplus · Accepted Answer

To compare the converted cost, we need to adjust the previous owner's purchase price for inflation. Using the CPI values given, we can calculate the inflation factor between 1980 and 1999 as (166.2/82.4) = 2.014. So, the previous owner's purchase price in 1999 dollars would be ($50,000 x 2.014) = $100,700. Therefore, you paid much more than the previous owner in today's dollars.

You Bought a House for $130,000 in 1999