Suppose today's CPI is 134.85,and today one must spend $580 to purchase the same basket of goods and services that could be bought for $400 in 1989.Then the CPI in 1989 was

Question

Quizplus · Accepted Answer

Using the formula for calculating inflation rate over time:
Inflation rate = (Price in current year / Price in base year) x 100

We can find the inflation rate between 1989 and today:
Inflation rate = (580 / 400) x 100 = 145

This means that prices have increased by 145% since 1989. To find the CPI in 1989, we need to use the inverse of the inflation rate formula:
CPI in base year = (Price in current year / Inflation rate) x 100

CPI in 1989 = (400 / 1.45) x 100 = 93. Is the closest option, therefore the answer is C.

Suppose Today's CPI Is 134