You bought a house in 1999 for $140,000. The previous owner paid $55,000 for the same house in 1976. Comparing the converted costs, who paid more for the house? (Assume the 1999 CPI is 166.2 and the 1976 CPI is 56.9.)
A) You paid more.
B) The previous owner paid more.
C) You both paid about the same.

Question

Quizplus · Accepted Answer

To compare the costs, adjust for inflation using the CPI. The previous owner's cost in 1999 dollars is $55,000 * (166.2 / 56.9) = $160,686. You paid $140,000 in 1999 dollars, so the previous owner paid more when adjusted for inflation.

You Bought a House in 1999 for $140,000