Question

A year's tuition at a state university cost $250 in 1972 when the CPI equaled 0.418. The cost of a year's tuition at the same state university cost $8,000 in 2016 when the CPI equaled 2.40. The real cost of tuition between 1972 and 2016:

Answer 1

Tuiton real cost incrased by 640%

Step-by-step explanation:

We divide the nominal cost of each year by the CPI index to get the real cost on each year (adjusted by inflation)

250 / 0.48 = 520,8333

8,000 / 2.40 = 3.333,33

The real price of tuiton increase from 520.83 to 3,333.33 which stnad for a percentage increase of:

3,333.33 / 520.83 = 6,4 = 640%