Question

If the CPI was 90 in 1975 and is 225 today, then $100 today purchases the same amount of goods and services as
a.

$25.00 purchased in 1975
b.

$135.55 purchased in 1975
c.

$40.00 purchased in 1975
d.

$33.33 purchased in 1975

Answer 1

To find out how much $100 today is equivalent to in 1975 dollars, we can use the Consumer Price Index (CPI).

Here are the steps to convert the current amount to the past amount:

1. **Identify the CPI values**:
- CPI in 1975 = 90
- CPI today = 225

2. **Use the formula to find the equivalent amount in 1975**:
\[
\text{Equivalent amount in 1975} = \text{Amount today} \times \left(\frac{\text{CPI in 1975}}{\text{CPI today}}\right)
\]

3. **Plug in the values**:
\[
\text{Equivalent amount in 1975} = 100 \times \left(\frac{90}{225}\right)
\]

4. **Calculate**:
\[
\frac{90}{225} = 0.4
\]
\[
\text{Equivalent amount in 1975} = 100 \times 0.4 = 40
\]

So, $100 today is equivalent to **$40.00 in 1975**.

The correct answer is:
**c. $40.00 purchased in 1975**.