Construct an index of economic activity for each of the three months, using Janu

Question

Construct an index of economic activity for each of the three months, using January as the base period. 54. The following table gives information on the Consumer Price Index and the monthly take- home pay of Bill Martin, an employee at Jeep Corporation. Year 1982-84 2007 Consumer Price Index (1982-84 100) 100.0 207.342 Mr. Martin's Monthly Take-Home Pay S 600 2,000 a. What is the purchasing power of the dollar in 2007, based on the period 1982-84? b. Determine Mr. Martin's "real" monthly income for 2007,

Explanation / Answer

Question 54

(a) Purchasing power of the dollar in 2007 = 100/ 207.342 = 0.4823

(b) Real monthly income for 2007 = 2000 * 0.4823 = $ 964.59

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