Question

In 1983, a microwave oven cost $78.75. Today, a microwave oven costs $92.66. If the CPI is 177, what is the relation of the actual price of a microwave oven to the expected price, to the nearest cent?
a.
The actual price is $46.73 lower than the expected price.
b.
The actual price is $5.59 lower than the expected price.
c.
The actual price is $13.91 higher than the expected price.
d.
The actual price is $71.35 higher than the expected price.

Answer 1

Take 1983 price and inflate by the CPI ratio: expected price = 78.75*(177/100) = 78.75*1.77 = 139.39.
Difference = 139.39 − 92.66 = 46.73.

So the actual price is $46.73 lower than the expected price. (Answer: a.)