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Economics (MindTap Course List)

13th Edition
Roger A. Arnold
ISBN: 9781337617383

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BuyFindarrow_forward

Economics (MindTap Course List)

13th Edition
Roger A. Arnold
ISBN: 9781337617383
Textbook Problem

Jim earned an annual salary of $15,000 in 1965. What is this salary equivalent to in 2005 dollars? (Use Exhibit 2 to find the CPI in the years mentioned.)

To determine

The equivalent salary.

Explanation

Given the annual salary of J in 1965 is $15,000. The value of CPI for 1965 is 31.5, and the CPI for 2005 is 195.3.

The salary of J in 2005 can be calculated by substituting the respective values in Equation (1) as follows:

SalaryCurrent year=SalaryEarlier year×(CPICurrent yearCPIEarlier year) (1)

Salary2005=</

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