Question

Betty earned $35000 in the base year of 1992. In 2004, the consumer price index stood at 124.6. Today Betty earns $55000. Find the value of her current salary of $55000 in terms of 1992 dollars.

Answer 1

The value of Betty's earnings of $55,000 in 1992 dolars is $44,141.25.

What is the value of earnings in 1992 dollars?

The consumer price index measures the changes in price of a basket of good.

CPI = (cost of basket of goods in current period / cost of basket of goods in base period) x 100

Value of the current earnings in 1992 dollars = $55,000 / 1.246 = $44,141.25

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