Question

minneapolis, mn has a cpi of 173. anchorage, ak has a cpi of 226. how does the purchasing power of someone in minneapolis earning a salary of \\$42,500 compare to the purchasing power of someone in anchorage earning a salary of \\$67,000?
a. the person living in minneapolis has \\$57.61/cpi more than the person in anchorage.
b. the person living in minneapolis has \\$130.45/cpi more than the person in anchorage.
c. the person living in anchorage has \\$50.80/cpi more than the person in minneapolis.
d. the person living in anchorage has \\$90.82/cpi more than the person in minneapolis.

Explanation:

Calculate purchasing power for Minneapolis

Using the Consumer Price Index and Inflation Adjustment knowledge points

$$ \text{Purchasing Power}_{\text{Minneapolis}} = \frac{\$42,500}{173} \approx \$245.6647\text{/CPI} $$

Calculate purchasing power for Anchorage

Using the Consumer Price Index and Inflation Adjustment knowledge points

$$ \text{Purchasing Power}_{\text{Anchorage}} = \frac{\$67,000}{226} \approx \$296.4602\text{/CPI} $$

Compare the purchasing powers

Using the Inflation Adjustment knowledge point

$$ \text{Difference} = 296.4602 - 245.6647 \approx \$50.7955\text{/CPI} $$

The person in Anchorage has approximately \(\$50.80\text{/CPI}\) more purchasing power than the person in Minneapolis.

Answer:

• a. The person living in Minneapolis has $57.61/CPI more than the person in Anchorage.
• b. The person living in Minneapolis has $130.45/CPI more than the person in Anchorage.
• c. The person living in Anchorage has $50.80/CPI more than the person in Minneapolis. (Correct answer)
• d. The person living in Anchorage has $90.82/CPI more than the person in Minneapolis.