In 1949,Sycamore,Illinois built a hospital for about $500,000.In 1987,the county restored the courthouse for about $2.4 million.A price index for nonresidential construction was 14 in 1949,92 in 1987,and 114.5 in 2000.According to these numbers,the hospital cost about
A)$3.6 million in 2000 dollars,which is less than the cost of the courthouse restoration in 2000 dollars.
B)$3.6 million in 2000 dollars,which is more than the cost of the courthouse restoration in 2000 dollars.
C)$4.1 million in 2000 dollars,which is less than the cost of the courthouse restoration in 2000 dollars.
D)$4.1 million in 2000 dollars,which is more than the cost of the courthouse restoration in 2000 dollars.

Question

Quizplus · Accepted Answer

To calculate the inflation-adjusted cost of the hospital in 2000 dollars, we need to use the price index for each year to convert the original cost to its equivalent value in 2000.

The hospital was built in 1949, so we need to adjust for inflation from 1949 to 2000 using the price index for those years:

(114.5/14) * $500,000 = $4,104,286

So the hospital cost about $4.1 million in 2000 dollars.

This is more than the cost of the courthouse restoration in 2000 dollars, which was $2.4 million. Therefore, the answer is D.

In 1949,Sycamore,Illinois Built a Hospital for About $500,000