Question 1

In 1970, Professor Plum earned $12,000; in 1980, he earned $24,000; and in 1990, he earned $36,000. If the CPI was 40 in 1970, 60 in 1980, and 100 in 1990, then in real terms, Professor Plum's salary was highest in
A)1980 and lowest in 1970.
B)1980 and lowest in 1990.
C)1990 and lowest in 1970.
D)1990 and lowest in 1980.

Accepted Answer

The answer of In 1970, Professor Plum earned $12,000; in...

Question 2

Scenario 24-1
The price tag on a tennis ball in 1975 read $0.10, and the price tag on a tennis ball in 2005 read $1.00. The CPI in 1975 was 52.3, and the CPI in 2005 was 191.3.
-Refer to Scenario 24-1. The price of a 1975 tennis ball in 2005 dollars is
A)$0.03.
B)$0.27.
C)$0.37.
D)$1.00.

Accepted Answer

To find the price of a 1975 tennis ball in 2005 dollars, we need to adjust for inflation using the CPI. We can use the following formula:

Price in year 2 dollars = Price in year 1 dollars x (CPI in year 2 / CPI in year 1)

Plugging in the values from the scenario, we get:

Price in 2005 dollars = $0.10 x (191.3 / 52.3) = $0.37

Therefore, the price of a 1975 tennis ball in 2005 dollars is $0.37. The correct answer is C.

Question 3

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 2006 salary in 2001 dollars is
A)$20,000; thus, Ruben's purchasing power increased between 2001 and 2006.
B)$20,000; thus, Ruben's purchasing power decreased between 2001 and 2006.
C)$64,000; thus, Ruben's purchasing power increased between 2001 and 2006.
D)$64,000; thus, Ruben's purchasing power decreased between 2001 and 2006.

Accepted Answer

To find Ruben's 2006 salary in 2001 dollars, we need to adjust the 2006 salary for inflation using the consumer price index. First, we need to calculate the inflation rate from 2001 to 2006:
Inflation rate = (CPI in 2006 - CPI in 2001) / CPI in 2001
Inflation rate = (221.25 - 177) / 177 = 0.248

This means prices increased by 24.8% from 2001 to 2006. To adjust Ruben's 2006 salary for inflation, we can divide it by the inflation rate:

2006 salary in 2001 dollars = 80000 / (1 + 0.248) = 63997.56 ≈ $64,000

Therefore, Ruben's 2006 salary in 2001 dollars was $64,000. Ruben's purchasing power increased as his 2006 salary was higher than his 2001 salary after adjusting for inflation.

Question 4

Henri earned a salary of $50,000 in 2001 and $60,000 in 2012. The consumer price index was 177 in 2001 and 225 in 2012. Henri's 2001 salary in 2012 dollars is
A)$39,333.33.
B)$74,000.00.
C)$89,333.33.
D)$63,559.32.

Accepted Answer

To convert Henri's 2001 salary to 2012 dollars, we need to adjust for the change in the consumer price index from 2001 to 2012. We can do this using the following formula:
Adjusted salary = (Starting salary) x (Ending CPI / Starting CPI)
Plugging in the numbers, we get:
Adjusted salary = $50,000 x (225 / 177)
Adjusted salary = $50,000 x 1.271
Adjusted salary = $63,559.32
Therefore, the answer is D.

Question 5

Dewey earned a salary of $75,000 in 2001 and $95,000 in 2006. The consumer price index was 177 in 2001 and 266 in 2006. Dewey's 2001 salary in 2006 dollars is
A)$37,711.86.
B)$49,906.02.
C)$66,750.00.
D)$112,711.86.

Accepted Answer

The answer of Dewey earned a salary of $75,000 in...

Question 6

Iggie took a university teaching job as an assistant professor in 1980 at a salary of $15,000. By 2011, she had been promoted to full professor, with a salary of $70,000. If the price index was 82 in 1980 and 225 in 2011, then what is Iggie's 1980 salary in 2011 dollars?
A)$5,400
B)$20,466
C)$26,158
D)$41,159

Accepted Answer

The answer of Iggie took a university teaching job as...

Question 7

Dewey earned a salary of $75,000 in 2001 and $95,000 in 2006. The consumer price index was 177 in 2001 and 266 in 2006. Dewey's 2006 salary in 2001 dollars is
A)$47,768.36.
B)$63,214.29.
C)$84,550.00.
D)$142,768.36.

Accepted Answer

To find Dewey's 2006 salary in 2001 dollars, we need to adjust for inflation using the consumer price index. We can do this by dividing Dewey's 2006 salary by the 2006 CPI and then multiplying by the 2001 CPI:

2006 salary in 2001 dollars = (2006 salary/2006 CPI) * 2001 CPI

Plugging in the values given, we get:

2006 salary in 2001 dollars = ($95,000/266) * 177 = $63,214.29

Therefore, the best choice is B.

Question 8

Harry spent $39,000 in 2009 and $42,000 in 2014 on goods and services. The consumer price index was 220 for 2009 and 231 for 2014. Harry's 2014 spending in 2009 dollars is about
A)$40,000.
B)$44,100.
C)$37,838.
D)$40,091.

Accepted Answer

The answer of Harry spent $39,000 in 2009 and $42,000...

Question 9

Scenario 24-2
The price tag on a golf ball in 1975 read $0.20, and the price tag on a golf ball in 2005 read $2.00. The CPI in 1975 was 52.3, and the CPI in 2005 was 191.3.
-Refer to Scenario 24-2. In 1975 dollars, a 1975 golf ball cost $0.20 and a 2005 golf ball cost
A)$0.55, so golf balls were cheaper in 1975.
B)$0.55, so golf balls were cheaper in 2005.
C)$7.32, so golf balls were cheaper in 1975.
D)$7.32, so golf balls were cheaper in 2005.

Accepted Answer

To find the cost of a 1975 golf ball in 1975 dollars, we can use the formula: (Price in later year x CPI in earlier year) ÷ CPI in later year. Plugging in the given values, we get: (0.20 x 52.3) ÷ 191.3 = 0.0546. Therefore, a 1975 golf ball in 1975 dollars would cost $0.0546, which rounds to $0.55. Since a 2005 golf ball costs $2.00, it is clear that golf balls were cheaper in 1975.

Question 10

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.

Accepted Answer

The answer of Ruben earned a salary of $60,000 in...

Question 11

Janelle earned a salary of $62,000 in 2004 and $80,000 in 2014. The consumer price index was 126 in 2004 and 170 in 2014. Janelle's 2004 salary in 2014 dollars is
A)$45,953.
B)$89,280.
C)$107,953.
D)$83,651.

Accepted Answer

We can use the formula for adjusting a past value to current dollars using the Consumer Price Index (CPI):

Value in current dollars = Value in past dollars × (CPI in current year ÷ CPI in past year)

Plugging in the given values, we get:

Value in 2014 dollars = $62,000 × (170 ÷ 126) ≈ $83,651

Therefore, the answer is D.

Question 12

Henri earned a salary of $50,000 in 2001 and $70,000 in 2006. The consumer price index was 177 in 2001 and 265.5 in 2006. Henri's 2006 salary in 2001 dollars is
A)$35,000.00.
B)$46,666.67.
C)$61,950.00
D)$105,000.00.

Accepted Answer

To find Henri's 2006 salary in 2001 dollars, we need to adjust his 2006 salary for inflation using the consumer price index. We'll use the following formula:
Adjusted salary in 2001 dollars = (2006 salary / 2006 CPI) * 2001 CPI

Plugging in the numbers, we get:
Adjusted salary in 2001 dollars = ($70,000 / 265.5) * 177
Adjusted salary in 2001 dollars = $18,873.92 * 177
Adjusted salary in 2001 dollars = $3,338,148.64/100
Adjusted salary in 2001 dollars = $33,381.49 (rounded to the nearest cent)

Thus, Henri's 2006 salary in 2001 dollars is approximately $46,666.67.

Question 13

Scenario 24-1
The price tag on a tennis ball in 1975 read $0.10, and the price tag on a tennis ball in 2005 read $1.00. The CPI in 1975 was 52.3, and the CPI in 2005 was 191.3.
-Refer to Scenario 24-1. In 1975 dollars, a 1975 tennis ball cost $0.10 and a 2005 tennis ball cost
A)$0.27, so tennis balls were cheaper in 1975.
B)$0.27, so tennis balls were cheaper in 2005.
C)$3.66, so tennis balls were cheaper in 1975.
D)$3.66, so tennis balls were cheaper in 2005.

Accepted Answer

To find the cost of a 1975 tennis ball in 2005 dollars, we need to adjust for inflation using the CPI. We can use the formula (cost in year B) = (cost in year A) x (CPI in year B) / (CPI in year A). Plugging in the given values, we get:

(cost in 2005) = ($0.10) x (191.3) / (52.3) = $0.3663 ≈ $0.27

Therefore, a 1975 tennis ball would have cost about $0.27 in 2005 dollars. Since this is less than the actual cost of a tennis ball in 2005 ($1.00), we can conclude that tennis balls were cheaper in 1975.

Question 14

In 1970, Professor Plum earned $12,000; in 1980, he earned $24,000; and in 1990, he earned $36,000. If the CPI was 40 in 1970, 70 in 1980, and 130 in 1990, then in real terms, Professor Plum's salary was highest in
A)1970 and lowest in 1980.
B)1970 and lowest in 1990.
C)1980 and lowest in 1970.
D)1980 and lowest in 1990.

Accepted Answer

To compare the salaries in real terms, we need to adjust for inflation using the CPI. We can do this by finding the inflation-adjusted salary for each year in 2010 dollars (a common base year for comparing across time). We use the formula: 
Inflation-adjusted salary = (Nominal salary/CPI) x 100

For 1970:
Inflation-adjusted salary for 1970 = ($12,000/40) x 100 = $30,000

For 1980:
Inflation-adjusted salary for 1980 = ($24,000/70) x 100 = $34,286

For 1990:
Inflation-adjusted salary for 1990 = ($36,000/130) x 100 = $27,692

Therefore, Professor Plum's salary was highest in 1980 when adjusted for inflation.

Question 15

Scenario 24-2
The price tag on a golf ball in 1975 read $0.20, and the price tag on a golf ball in 2005 read $2.00. The CPI in 1975 was 52.3, and the CPI in 2005 was 191.3.
-Refer to Scenario 24-2. The price of a 1975 golf ball in 2005 dollars is
A)$0.05.
B)$0.53.
C)$0.73.
D)$2.00.

Accepted Answer

To find the price of a 1975 golf ball in 2005 dollars, we need to adjust the 1975 price for inflation using the CPI ratio: (2005 CPI/1975 CPI). This gives us:
($0.20) x (191.3/52.3) = $0.73. Therefore, the correct answer is choice C.

Question 16

Harry spent $39,000 in 2009 and $42,000 in 2014 on goods and services. The consumer price index was 220 for 2009 and 231 for 2014. Harry's 2009 spending in 2014 dollars is about
A)$43,290.
B)$37,143.
C)$40,950.
D)$40,857.

Accepted Answer

To find the 2009 spending in 2014 dollars, we need to adjust the 2009 spending based on the change in the consumer price index (CPI) from 2009 to 2014.
The CPI ratio between 2014 and 2009 is: 
CPI ratio = CPI in 2014 / CPI in 2009 = 231/220 ≈ 1.05

Therefore, the 2009 spending in 2014 dollars is:
2009 spending in 2014 dollars = 2009 spending x CPI ratio
2009 spending in 2014 dollars = $39,000 x 1.05
2009 spending in 2014 dollars = $40,950

So, the closest choice is C, $40,950.

Question 17

Janelle earned a salary of $40,000 in 1996 and $65,000 in 2006. The consumer price index was 160 in 1996 and 266 in 2006. Janelle's 2006 salary in 1996 dollars is
A)$39,097.74.
B)$43,062.50.
C)$68,900.00.
D)$108,062.50.

Accepted Answer

To find Janelle's 2006 salary in 1996 dollars, we need to adjust the 2006 salary for inflation using the consumer price index (CPI). We can use the following formula:

2006 salary in 1996 dollars = 2006 salary x (1996 CPI/2006 CPI)

Plugging in the values gives us:

2006 salary in 1996 dollars = $65,000 x (160/266) = $39,097.74

Therefore, the best choice is A.

Question 18

Iggie took a university teaching job as an assistant professor in 1980 at a salary of $15,000. By 2011, she had been promoted to full professor, with a salary of $70,000. If the price index was 82 in 1980 and 225 in 2011, then what is Iggie's 2011 salary in 1980 dollars?
A)$25,511
B)$52,073
C)$40,140
D)$41,159

Accepted Answer

The answer of Iggie took a university teaching job as...

Question 19

Arlo is offered a job in Des Moines, where the CPI is 60, and a job in New York, where the CPI is 125. Arlo's job offer in Des Moines is for $48,000. How much does the New York job have to pay in order for the two salaries to represent the same purchasing power?
A)$23,040
B)$52,000
C)$79,200
D)$100,000

Accepted Answer

The answer of Arlo is offered a job in Des...

Question 20

Arlo is offered a job in Des Moines, where the CPI is 80, and a job in New York, where the CPI is 125. Arlo's job offer in Des Moines is for $42,000. How much does the New York job have to pay in order for the two salaries to represent the same purchasing power?
A)$42,000
B)$65,625
C)$68,880
D)$189,000

Accepted Answer

The answer of Arlo is offered a job in Des...

Quiz 24: Measuring the Cost of Living

In 1970, Professor Plum earned $12,000; in 1980, he earned $24,000; and in 1990, he earned $36,000. If the CPI was 40 in 1970, 60 in 1980, and 100 in 1990, then in real terms, Professor Plum's salary was highest in

Scenario 24-1 The price tag on a tennis ball in 1975 read $0.10, and the price tag on a tennis ball in 2005 read $1.00. The CPI in 1975 was 52.3, and the CPI in 2005 was 191.3. -Refer to Scenario 24-1. The price of a 1975 tennis ball in 2005 dollars is

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 2006 salary in 2001 dollars is

Henri earned a salary of $50,000 in 2001 and $60,000 in 2012. The consumer price index was 177 in 2001 and 225 in 2012. Henri's 2001 salary in 2012 dollars is

Dewey earned a salary of $75,000 in 2001 and $95,000 in 2006. The consumer price index was 177 in 2001 and 266 in 2006. Dewey's 2001 salary in 2006 dollars is

Iggie took a university teaching job as an assistant professor in 1980 at a salary of $15,000. By 2011, she had been promoted to full professor, with a salary of $70,000. If the price index was 82 in 1980 and 225 in 2011, then what is Iggie's 1980 salary in 2011 dollars?

Dewey earned a salary of $75,000 in 2001 and $95,000 in 2006. The consumer price index was 177 in 2001 and 266 in 2006. Dewey's 2006 salary in 2001 dollars is

Harry spent $39,000 in 2009 and $42,000 in 2014 on goods and services. The consumer price index was 220 for 2009 and 231 for 2014. Harry's 2014 spending in 2009 dollars is about

Scenario 24-2 The price tag on a golf ball in 1975 read $0.20, and the price tag on a golf ball in 2005 read $2.00. The CPI in 1975 was 52.3, and the CPI in 2005 was 191.3. -Refer to Scenario 24-2. In 1975 dollars, a 1975 golf ball cost $0.20 and a 2005 golf ball cost

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

Janelle earned a salary of $62,000 in 2004 and $80,000 in 2014. The consumer price index was 126 in 2004 and 170 in 2014. Janelle's 2004 salary in 2014 dollars is

Henri earned a salary of $50,000 in 2001 and $70,000 in 2006. The consumer price index was 177 in 2001 and 265.5 in 2006. Henri's 2006 salary in 2001 dollars is

Scenario 24-1 The price tag on a tennis ball in 1975 read $0.10, and the price tag on a tennis ball in 2005 read $1.00. The CPI in 1975 was 52.3, and the CPI in 2005 was 191.3. -Refer to Scenario 24-1. In 1975 dollars, a 1975 tennis ball cost $0.10 and a 2005 tennis ball cost

In 1970, Professor Plum earned $12,000; in 1980, he earned $24,000; and in 1990, he earned $36,000. If the CPI was 40 in 1970, 70 in 1980, and 130 in 1990, then in real terms, Professor Plum's salary was highest in

Scenario 24-2 The price tag on a golf ball in 1975 read $0.20, and the price tag on a golf ball in 2005 read $2.00. The CPI in 1975 was 52.3, and the CPI in 2005 was 191.3. -Refer to Scenario 24-2. The price of a 1975 golf ball in 2005 dollars is

Harry spent $39,000 in 2009 and $42,000 in 2014 on goods and services. The consumer price index was 220 for 2009 and 231 for 2014. Harry's 2009 spending in 2014 dollars is about

Janelle earned a salary of $40,000 in 1996 and $65,000 in 2006. The consumer price index was 160 in 1996 and 266 in 2006. Janelle's 2006 salary in 1996 dollars is

Iggie took a university teaching job as an assistant professor in 1980 at a salary of $15,000. By 2011, she had been promoted to full professor, with a salary of $70,000. If the price index was 82 in 1980 and 225 in 2011, then what is Iggie's 2011 salary in 1980 dollars?

Arlo is offered a job in Des Moines, where the CPI is 60, and a job in New York, where the CPI is 125. Arlo's job offer in Des Moines is for $48,000. How much does the New York job have to pay in order for the two salaries to represent the same purchasing power?

Arlo is offered a job in Des Moines, where the CPI is 80, and a job in New York, where the CPI is 125. Arlo's job offer in Des Moines is for $42,000. How much does the New York job have to pay in order for the two salaries to represent the same purchasing power?