Today, Jennifer earns $55000 at her first job. Her mom used to make $15,000 at her first job in 1975. Jennifer is of the opinion that she makes more than her mom would have made if she started working today. Her mom thinks Jennifer would have earned less than she if Jennifer had started working in 1975. If the CPI today is 231 and the CPI in 1975 was 82, then

Consumer Price Index (CPI) measures changes in the weighted average prices of a basket of consumer goods and services. It is calculated by taking price changes for each item in the basket of goods and services and then calculating the average. CPI can be used to index the effect of inflation in the real value of wages, salaries, and pensions; to regulate prices; and to deflate monetary magnitudes.

Given:

Jennifer earns $55000 at her first job today.
Jennifer mom used to make $15,000 at her first job in 1975.
Today CPI is 231
CPI in 1975 was 82

($15000/82) × 231 = $42256

($55000/231) × 82 = $19524

Jennifer earned more than her mother

fichoh fichoh · Answer 2 · 2020-03-18T20:37:41+01:00

Answer: Jennifer made more than her mum

Explanation: The consumer price index (CPI) is a measure of the aggregate price level in an economy. The consumer price index is used as an instrument to measure inflation by estimating the average variation in prices of goods between two given periods.

Jennifer's first earning = $55000

Mom's first earning = $15000

CPI in 1975 = 82

CPI today = 231

($55000/231) × 82 = $19524

($15000/82) × 231 = $42256

Therefore Jennifer made more than her mum