Question

In 1931, the U.S. President was paid a salary of $75,000. Government statistics show a consumer price index of 15.2 for 1931 and 207 for 2007. President's 1931 salary was equivalent to a 2007 salary of about Group of answer choices $15,525,000 $1,021,382 $1,140,000 $5,507,240

Answer 1

Answer: $1,021,382

Explanation:

The Consumer Price index (CPI) is an economic measure that enables us calculate inflation. It checks for a price changes in a group or basket of goods and then averages these price changes to find out how much they may have changed overtime.

A higher CPI means prices have increased.

CPI can then be used to calculate the potential values of goods in different years using another year as a base. This means that prices of goods in one year can be written in terms of prices in another year.

This can be done by Dividing the CPI in the current year by the CPI in the base year (year being expressed in terms of) and then multiplying the result by the price of the good in question.

In this case the good is the salary of $75,000.

The 2007 equivalent of a 1931 salary will therefore be,

= 75,000 * ( 207/15.2)

= $1,021,381.57

= $1,021,382