Question

The cost-of-living index increased from 100 to 120. What effect does this have on the purchasing power of the dollar?

Answer 1

It means that something you used to buy for $1.00 now costs $1.20.

Answer 2

Thank you for the response. That was the answer that I initially calculated using percentage change; however, the answer is that it was lowered by 16 2/3%. The explanation is that it now takes $6 to buy what used to cost $5. Each dollar is worth 1/6 less.

Answer 3

I can't calculate the correct answer.

Answer 4

I figured it out. 120-100=20, which is the net difference. Divide net difference by the new cost of 120, which equals 16.67 less.