Assuming a price index calculated 104.5 in 2008,compared with 100 in 2007,for a bundle of goods,what is the current purchasing power of every dollar,compared to 2007?

Question

Quizplus · Accepted Answer

The price index increased by 4.5% from 2007 (base year) to 2008. This means that every dollar in 2008 had the purchasing power of $1/1.045 = $0.9569 in 2007. Therefore, the current purchasing power of every dollar, compared to 2007, is 95.69 cents (option B).

Assuming a Price Index Calculated 104