5 While rooting through the attic you discover a box of old

5) While rooting through the attic you discover a box of old tax forms. You find that your grandmother made $75 working part-time during December 1964 when the CPI was 31.3. How much would you need to have earned in in January of 2013 to have at least as much real income as your grandmother did in 1964? To determine the CPI for January of 2013 you can visit the Bureau of Labor Statistic website (www.bls.gov). Show your work for credit.

Solution

Yes, your data is sufficient to answer it.

Required minimum earnings in Jan 2013 = $75 x (CPI, Jan 2013 / CPI, Dec 1964)

= $75 x (230.28** / 31.3)

= $75 x 7.3572

= $551.79

So, $551.70 in Jan 2013 will produce the same real income as in 1964.

**CPI data as provided by you