How do you convert a price of a good from an earlier time into today's price?
A) Take the earlier price and divide by today's price,then multiply by the ratio of the consumer price index (CPI)today to that of the CPI in the old year.
B) Take the earlier price and multiply by the ratio of the earlier gross domestic product (GDP)deflator to today's consumer price index.
C) Take today's price and divide by the earlier price in terms of the gross domestic product (GDP)deflator.
D) Take the earlier price and multiply by the ratio of today's consumer price index (CPI)to the earlier CPI.
E) Take the earlier price and multiply by the ratio of the earlier consumer price index (CPI)to the current CPI.

Question

Quizplus · Accepted Answer

The most commonly used method to convert a price of a good from an earlier time into today's price is to multiply the earlier price by the ratio of today's consumer price index (CPI) to the earlier CPI. This takes into account inflation and the change in the value of money over time. Therefore, the correct choice is D.

How Do You Convert a Price of a Good from an Earlier