Question

Janelle earned a salary of $62,000 in 2004 and $80,000 in 2014. The consumer price index was 126 in 2004 and 170 in 2014. Janelle’s 2004 salary in 2014 dollars is a. $45,953. b. $89,280. c. $107,953. d. $83,651.

Answer 1

d. $83,651.

Step-by-step explanation:

In this question, we use the proportionate method which is shown below:

Salary in 2014 in dollars equals to

= Salary in 2004 × (Consumer price index in 2014 ÷ Consumer price index in 2004)

= $62,000 × (170 ÷ 126)

= $83,651

Simply we use divide the consumer price index in 2014 by consumer price index in 2004 and then multiply it with the earned salary in 2004