In 1995, the CPI was 152.5 and the price of an economics textbook was $70.00 and a music CD was $16.00. If the CPI was 172.3 in 2011, what were the prices of the economics textbook and the music CD in 2011 dollars?
What will be an ideal response?
To adjust the two prices, the ratio of the CPI in 2011 to the CPI in 1995 is needed. This ratio is (172.3)/(152.5 ) = 1.13. Then multiply the 1995 prices by this ratio to convert the prices to 2011 dollars. This yields a 2011 dollar price for the textbook of ($70.00 × 1.13 ) = $79.10 and a 2011 dollar price for the CD of ($16.00 × 1.13 ) = $18.08.
You might also like to view...
The transfer of short-term liabilities into long-term investments is called:
A) maturity transformation. B) risk transformation. C) investment restructuring. D) intertemporal transformation.
Empirical studies have shown that in most situations people are:
A) risk-averse. B) risk-neutral. C) risk-loving. D) either risk-neutral or risk-loving but not risk-averse.
The largest government-run health care system in the world, with 1.7 million employees, is in
A) the United Kingdom. B) the United States. C) Japan. D) Canada.
Often owners of firms who hire managers must install incentive or bonus plans to ensure that the:
A. company will have positive economic profits. B. manager will work hard. C. company is financially secure. D. manager will maintain employee morale.