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21 April, 20:58

Bill's nominal income in 1990 was $1,333 per month. The CPI had a value of 147 in 1990 and had a value of 227 in 2017. What is the value of Bill's 1990 income, measured in 2017 dollars?

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  1. 21 April, 22:14
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    CPI refers to Consumer Price Index, that is, a measure of the price level of consumer products that shows the price trend for goods and services that private households demand. The percentage change in the CPI is often used as a general measure of inflation in an economy.

    Therefore, to know the value of Bill's 1990 income, measured in 2017 dollars, we have to do the following calculation:

    1,333 / 147 = Value of 1990 Bill's income

    9.06 = Value of 1990 Bill's income

    9.06 x 227 (2017 CPI) = Value of 1990 Bill's income measured in 2017 dollars

    2,058.44 = Value of 1990 Bill's income measured in 2017 dollars

    As we can see, the value of Bill's 1990 income, measured in 2017 dollars, was of $2,058.44.
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