Question

Wilson is offered a job in Kansas City that pays $50,000 and a job in Dallas that pays $60,000. Which pair of CPIs would ensure that the two salaries have the same purchasing power?a. 100 in Kansas City and 124.5 in Dallas b. 80 in Kansas City and 100 in Dallas c. 125 in Kansas City and 150 in Dallas 0 d. 100 in Kansas City and 140 in Dallas

Answer 1

option C is correct CPI in Kansas City is 125 and in Dallas is 150.

Step-by-step explanation:

given data

Kansas City pays = $50,000

Dallas that pays = $60,000

solution

we know that CPI base year is always = 100

first we get here real salary value in Kansas City that is express as

Real Value = Salary in Kansas City × (CPI base year ÷ CPI current year) ..........1

put her value we get

Real Value = $50,000 ×
`(100)/(125)`

Real Value = $40000

and now we get here real salary value in Dallas that is express as

Real Value = Salary in Dallas City × (CPI base year ÷ CPI current year) ..........2

put her value we get

Real Value = $60,000 ×
`(100)/(150)`

Real Value = $40000

so now we can see that both value is same in both city with CPI Kansas City = 125 and CPI Dallas = 150

so here correct option is c. 125 in Kansas City and 150 in Dallas