Problems 69 – 72 require the following discussion. The consumer price index(CPI) indicates the relative change in the price over time for a fixed basket of goods and services. It is a cost of living index that helps measure the effect of inflation on the cost of goods and services. The CPI uses the base period 1982-84 for comparison (the CPI for this period is 100). The CPI for March 2017 was $243.80. This means that $100 in the period 1982-84 has the same purchasing power as $243.80 in March 2017. In general, if the rate of inflation averages r percent per annum over n years, then CPI index after n years is C P I = C P I 0 ( 1 + r 100 ) n Where, CPI 0 is the CPI index at the beginning of the n- year period Consumer Price Index If the average annual inflation rate is 3.1%, how long will it take for the CPI index to double? (A doubling of the CPI index means purchasing power is cut in half.)
Problems 69 – 72 require the following discussion. The consumer price index(CPI) indicates the relative change in the price over time for a fixed basket of goods and services. It is a cost of living index that helps measure the effect of inflation on the cost of goods and services. The CPI uses the base period 1982-84 for comparison (the CPI for this period is 100). The CPI for March 2017 was $243.80. This means that $100 in the period 1982-84 has the same purchasing power as $243.80 in March 2017. In general, if the rate of inflation averages r percent per annum over n years, then CPI index after n years is C P I = C P I 0 ( 1 + r 100 ) n Where, CPI 0 is the CPI index at the beginning of the n- year period Consumer Price Index If the average annual inflation rate is 3.1%, how long will it take for the CPI index to double? (A doubling of the CPI index means purchasing power is cut in half.)
Solution Summary: The author calculates the time in which the CPI index will double in 23 years.
Problems 69 – 72 require the following discussion. The consumer price index(CPI) indicates the relative change in the price over time for a fixed basket of goods and services. It is a cost of living index that helps measure the effect of inflation on the cost of goods and services. The CPI uses the base period 1982-84 for comparison (the CPI for this period is 100). The CPI for March 2017 was $243.80. This means that $100 in the period 1982-84 has the same purchasing power as $243.80 in March 2017. In general, if the rate of inflation averages r percent per annum over n years, then CPI index after n years is
C
P
I
=
C
P
I
0
(
1
+
r
100
)
n
Where, CPI0 is the CPI index at the beginning of the n-year period
Consumer Price Index If the average annual inflation rate is 3.1%, how long will it take for the CPI index to double? (A doubling of the CPI index means purchasing power is cut in half.)
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