Based on the available information, the best estimate for the budget of a U.S. movie in 2005 is approximately $184 million and the average budget for a U.S. movie now is lower compared to 2005, after adjusting for inflation.
To estimate the budget of a U.S. movie for 2005, use the Consumer Price Index (CPI) to adjust for inflation. The CPI measures changes in the price level of a basket of goods and services over time. By comparing the CPI values for 2005 and the present, estimate the relative value of money between the two periods.
According to the Bureau of Labor Statistics, the CPI for all items in the United States was 195.3 in 2005 and 258.8 in 2021. To calculate the inflation factor, divide the CPI for 2021 by the CPI for 2005:
Inflation factor = CPI 2021 / CPI 2005
= 258.8 / 195.3
≈ 1.325
Now, estimate the budget of a U.S. movie in 2005 by multiplying the average budget for a U.S. movie now ($139 million) by the inflation factor:
Estimated budget of a U.S. movie in 2005 = Average budget now * Inflation factor
= $139 million * 1.325
≈ $184 million
Therefore, the best estimate for the budget of a U.S. movie in 2005 is approximately $184 million.
To determine whether the average budget now is higher, lower, or about the same compared to 2005, compare the estimated budget for 2005 ($184 million) with the average budget now ($139 million).
Since $139 million is lower than $184 million, we can conclude that the average budget for a U.S. movie now is lower compared to 2005, after adjusting for inflation.