The Consumer Price Index (1982-84 = 100) was about 207 in 2007. In 1989, the CPI was 124. Tuition for in-state students at one Big Ten university was $2032 in 1989. In 2007 dollars, this tuition is equivalent to
A) 2032 × (2007/1989) = $2050.
B) 2032 × (207/100) = $4206.
C) 2032 × (124/207) = $1217.
D) 2032 × (207/124) = $3392.

Question

Quizplus · Accepted Answer

To convert the 1989 tuition into 2007 dollars, we need to adjust it for inflation using the CPI.

First, we need to find the inflation rate between 1989 and 2007. We can do this by using the formula:

Inflation rate = (CPI in later year - CPI in earlier year) / CPI in earlier year

Plugging in the values we have, we get:

Inflation rate = (207 - 124) / 124 = 67.7%

This tells us that prices have increased by 67.7% between 1989 and 2007.

To adjust the 1989 tuition for inflation, we need to multiply it by the inflation rate:

Adjusted tuition = 2032 * (1 + 0.677) = $3392 (rounded to the nearest dollar)

Therefore, the correct answer is D.

The Consumer Price Index (1982-84 = 100) Was About 207