Babe Ruth's 1931 salary was $80 000.The price index for 1931 is 15.2 and the price index for the current year is 195.What would Ruth's 1931 salary be equivalent to in the current year?

Question

Babe Ruth's 1931 salary was $80 000.The price index for 1931 is 15.2 and the price index for the current year is 195.What would Ruth's 1931 salary be equivalent to in the current year?

Quizplus · Accepted Answer

We can use the formula:

(current year price index / past year price index) x past year salary = current year salary

Plugging in the given values, we get:

(195/15.2) x $80 000 = $1 026 316.00

Rounded to the nearest thousand, the equivalent salary in the current year is $1 026 000, which is option D.

Babe Ruth's 1931 Salary Was $80 000