Question

If the CPI was 95 in 1955 and is 475 today, then $100 today purchases the same amount of goods and services as...

a. $20.00 purchased in 1955.
b. $4.75 purchased in 1955.
c. $500 purchased in 1955.
d. $95.00 purchased in 1955.

Answer 1

The correct answer is option a.

Step-by-step explanation:

The CPI or consumer price index is a tool to measure inflation in the economy. It includes a basket of goods and services generally consumed by households. Changes in the price of these goods and services are calculated to measure the inflation rate.

In the year 1955, the CPI was 95.

In the current year, the CPI is 475.

This means that today $100 will be able to purchase

=
`\$ 100 \ *\ (95)/(475)`

= $20

$100 in current year will be able to purchase the same amount of goods and services that $20 purchased in the year 1995.