- CFA Exams
- CFA Level I Exam
- Topic 2. Economics
- Learning Module 11. Understanding Business Cycles
- Subject 7. Inflation
CFA Practice Question
A job paid $8,700 in 1970, when the CPI was 29. In 2011, the CPI was 164. How much would you have to earn in 2011 to be making the same real wage?
A. $58,000
B. $164,000
C. Neither of the above answers is correct.
Explanation: In real terms, the 1970 wage = 8,700/29 = 300. Thus, 300*164= $49,200, the equivalent wage in 2011.
User Contributed Comments 3
| User | Comment |
|---|---|
| prachirp | 8700/29 *164 =$49,200 |
| apguil14 | Conceptually I think about it in terms of inflation. 164/29 = 5.6552, so $1 in 2011 is worth 5.6552 times more than $1 in 1970. Hence, 8700*5.6552 = 49200 |
| Rivermax | good explanation aphuil14 |