Question

the cpi is currently 153. if a coffee maker costs \\$31.90 today, how much did one cost in 1983, to the nearest cent?
a. \\$20.85
b. \\$21.20
c. \\$26.60
d. \\$48.81

Explanation:

Identify given values and formula

Using the Consumer Price Index and Inflation Adjustment knowledge points

• Current CPI: \(153\)
• Current cost: \(\$31.90\)
• Base year (1983) CPI: \(100\)
• Formula: \(\text{Cost in 1983} = \text{Current Cost} \times \frac{\text{CPI}_{1983}}{\text{CPI}_{\text{current}}}\)

Calculate the cost in 1983

Using the Inflation Adjustment knowledge point

$$ \text{Cost in 1983} = 31.90 \times \frac{100}{153} $$

$$ \text{Cost in 1983} \approx 20.84967 $$

Round to the nearest cent

Using the Inflation Adjustment knowledge point

$$ \text{Cost in 1983} \approx \$20.85 $$

Answer:

• a. $20.85 (Correct answer)
• b. $21.20
• c. $26.60
• d. $48.81