web exercise 293 p. 1. As you have seen in this chapter, a dollar today does...

web exercise 293 p.

1. As you have seen in this chapter, a dollar today does not have the same value as a dollar in the future or dollar received in the past. At the time of his death in 1937, John D. Rockefeller was estimated to be worth $1.4 million.

Go to the bureau of labor Statistics at www.bls.gov. Highlight "Database & Tools" at the top of the page and select "calculators" in the drop-down menu. Click the calculator icon next to "Inflation". How much would Rockefeller's fortune be worth in today's dollars?

2. Now let's consider a hypothetical situation where you are worth $1 million at the end of World War II. Using the same CPI tool, calculate how much you would need today to maintain the same purchasing power as in 1945.

3. A assume that the rate of inflation for the next 30 years is the same as in the last 30 years. How much will you need to have the same purchasing power as you have today?

Solutions

Expert Solution

1. CPI refers to Consumer Price Index, CPI measures the estimated change in the price of goods as compared to the base year. It is used to measure the change in the purchasing power of the currency of the country.

As per the bureau of labor Statistics, Rockefeller's fortune be worth $25.68 Million in today's dollars

2. In oder to maintain the same purchasing power as in 1945 for $ 1 Million, $14.5 Million is needed today

3. One will need to have twice the amount of money to maintain the same purchasing power as today 30 years from now.

For eg: Suppose you have $ 1 Million, in oder to maintain the same purchasing power as $ 1 Million, 30 years from now you will need approx. $ 2 Million .

jeff jeffy answered 2 years ago

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