Question

Sam earned $42,000 in 2002. If the consumer price index in 2003 was 101.58 and in 2007 was 137.11, what did Sam have to earn in 2007 to keep up with inflation?

Answer 1

To keep up with inflation, Sam had to earn $56,700 in 2007.

Step-by-step explanation:

To calculate the amount Sam had to earn in 2007 to keep up with inflation, we need to use the Consumer Price Index (CPI) values. The CPI measures changes in the price level of a basket of goods and services over time.

To find the inflation rate from 2002 to 2007, we divide the CPI for 2007 (137.11) by the CPI for 2002 (101.58) and subtract 1. This gives us an inflation rate of approximately 0.35 or 35%.

To calculate the amount Sam had to earn in 2007, we multiply his earnings in 2002 ($42,000) by the inflation rate (1 + 0.35) to get $56,700. Therefore, Sam had to earn $56,700 in 2007 to keep up with inflation.