Question

In July 1988 the price of postage stamps was 32 cents and the CPI was 118.5. In July 2015 the price of postage stamps was 44 cents and the CPI was 237.7. What was the real value in 2015 prices of postage stamps in 1988?

Answer 1

The real value of a postage stamp from 1988 in 2015 dollars, considering the CPI of both years, is approximately 64 cents.

Step-by-step explanation:

The question asks for the real value of postage stamps in 1988 when expressed in 2015 dollars, given the Consumer Price Index (CPI) for both years. To find the real value, we use the following formula:

Real Value in 2015 = (Price in 1988) × (CPI in 2015 / CPI in 1988)

So, this would be:

Real Value in 2015 = $0.32 × (237.7 / 118.5) = $0.32 × 2.005 = $0.642.

Therefore, the real value of postage stamps in 1988 in 2015 prices was approximately 64 cents.