If someone needed $21,000 to maintain a particular standard of living in 1984, how much would have been needed to maintain the same standard of living in 2017? Assume that all prices have risen at the same rate as the CPI.
If someone needed $21,000 to maintain a particular standard of living in 1984, how much would have been needed to maintain the same standard of living in 2017? Assume that all prices have risen at the same rate as the CPI.
Chapter1: Making Economics Decisions
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8. how much would have been needed
![### Adjusting for Inflation Using the Consumer Price Index (CPI)
#### Problem Statement:
If someone needed $21,000 to maintain a particular standard of living in 1984, how much would have been needed to maintain the same standard of living in 2017? Assume that all prices have risen at the same rate as the CPI.
#### Calculation:
- **CPI in 1984**: 103.9
- **CPI in 2017**: 245.1
- **Initial Amount Needed in 1984**: $21,000
The formula to adjust for inflation using CPI is:
\[ \text{Adjusted Amount} = \text{Initial Amount} \times \left( \frac{\text{CPI in Target Year}}{\text{CPI in Initial Year}} \right) \]
Plugging in the values:
\[ \text{Adjusted Amount} = 21000 \times \left( \frac{245.1}{103.9} \right) \]
Using the above calculation method, you will arrive at the amount required in 2017 to maintain the same standard of living as in 1984.
#### How much would have been needed?
\[ \$ \]
(Round to the nearest dollar as needed.)
### Average Annual Consumer Price Index (CPI) (1982-1984 = 100)
| Year | CPI | Year | CPI | Year | CPI |
|------|-------|------|-------|------|-------|
| 1981 | 90.9 | 1995 | 152.4 | 2009 | 214.5 |
| 1982 | 96.5 | 1996 | 156.9 | 2010 | 218.1 |
| 1983 | 99.6 | 1997 | 160.5 | 2011 | 224.9 |
| 1984 | 103.9 | 1998 | 163.0 | 2012 | 229.6 |
| 1985 | 107.6 | 1999 | 166.6 | 2013 | 233.0 |
| 1986 | 109.6 | 2000 | 172.2 | 2014 | 236.7 |
| 1987 | 113.6 | 2001 | 177.1 |](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fd357b89a-d63d-400d-a75c-5f74a0421e19%2F1ee001cf-f99a-4410-a76b-44ebb5cd6cc5%2Fcbk81ql_processed.png&w=3840&q=75)
Transcribed Image Text:### Adjusting for Inflation Using the Consumer Price Index (CPI)
#### Problem Statement:
If someone needed $21,000 to maintain a particular standard of living in 1984, how much would have been needed to maintain the same standard of living in 2017? Assume that all prices have risen at the same rate as the CPI.
#### Calculation:
- **CPI in 1984**: 103.9
- **CPI in 2017**: 245.1
- **Initial Amount Needed in 1984**: $21,000
The formula to adjust for inflation using CPI is:
\[ \text{Adjusted Amount} = \text{Initial Amount} \times \left( \frac{\text{CPI in Target Year}}{\text{CPI in Initial Year}} \right) \]
Plugging in the values:
\[ \text{Adjusted Amount} = 21000 \times \left( \frac{245.1}{103.9} \right) \]
Using the above calculation method, you will arrive at the amount required in 2017 to maintain the same standard of living as in 1984.
#### How much would have been needed?
\[ \$ \]
(Round to the nearest dollar as needed.)
### Average Annual Consumer Price Index (CPI) (1982-1984 = 100)
| Year | CPI | Year | CPI | Year | CPI |
|------|-------|------|-------|------|-------|
| 1981 | 90.9 | 1995 | 152.4 | 2009 | 214.5 |
| 1982 | 96.5 | 1996 | 156.9 | 2010 | 218.1 |
| 1983 | 99.6 | 1997 | 160.5 | 2011 | 224.9 |
| 1984 | 103.9 | 1998 | 163.0 | 2012 | 229.6 |
| 1985 | 107.6 | 1999 | 166.6 | 2013 | 233.0 |
| 1986 | 109.6 | 2000 | 172.2 | 2014 | 236.7 |
| 1987 | 113.6 | 2001 | 177.1 |
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