Five years ago, when you took up your current job, your wage was $20 an hour. Now it is $22. Suppose you do not know the CPIs, but only the inflation rates for the past 5 years: 2.5, 1.9, 2.2, 2.7, and 3.1 percent.
a) In real terms, do you now earn more or less than 5 years ago?
b) How much was the inflation rate over the 5-year period?
c) If the CPI was 112.5 in the first year, how much is it today?

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The Answer of Five years ago, when you took up your current job, your wage was $20 an hour. Now it is $22. Suppose you do not know the CPIs, but only the inflation rates for the past 5 years: 2.5, 1.9, 2.2, 2.7, and 3.1 percent.
a) In real terms, do you now earn more or less than 5 years ago?
b) How much was the inflation rate over the 5-year period?
c) If the CPI was 112.5 in the first year, how much is it today?

Five Years Ago, When You Took Up Your Current Job