Final answer:
To change dollar values from one year to another, one uses the general equation for percentage changes, which accounts for inflation. The equation is percentage change = ((Newer Amount - Older Amount) / Older Amount) x 100. An example is changing $1 from 1955 to 2012 using its purchasing power.
Step-by-step explanation:
To change dollar values from one year to another, you can use the inflation rate formula to determine the purchasing power of money over time. The general equation for percentage changes between two years is as follows:
- Percentage Change = ((Newer Amount - Older Amount) / Older Amount) x 100
The example given involves changing $1 from the year 1955 to the year 2012. To determine the new value, you take the old value and adjust it by the percentage change, which represents the rate of inflation over that time. If $1 in 1955 has the purchasing power of $8.57 in 2012, it means there has been an increase or percentage change in the cost, which indicates inflation.
In a GDP growth rate scenario where the nation's GDP was $1 trillion in 2005 and increased to $1.03 trillion in 2006, the growth rate calculation is:
- Growth Rate = ((New GDP - Old GDP) / ((New GDP + Old GDP) / 2)) x 100
This formula calculates the percentage growth from one time period to another, taking the average of the two time periods as the denominator.