Ruben earned a salary of $60,000 in 2001 and $80,000 in 2006.The consumer price index was 177 in 2001 and 221.25 in 2006.Ruben's 2001 salary in 2006 dollars is
A)$75,000;thus,Ruben's purchasing power increased between 2001 and 2006.
B)$75,000;thus,Ruben's purchasing power decreased between 2001 and 2006.
C)$85,000;thus,Ruben's purchasing power increased between 2001 and 2006.
D)$85,000;thus,Ruben's purchasing power decreased between 2001 and 2006.

Question

Quizplus · Accepted Answer

To adjust Ruben's 2001 salary to 2006 dollars, we use the formula: (2001 salary) * (2006 CPI / 2001 CPI) = $60,000 * (221.25 / 177) = $75,000. Since his 2006 salary was $80,000, his purchasing power increased.

Ruben Earned a Salary of $60,000 in 2001 and $80,000