Question

Year	Annual Average CPI
2010	218.1
2011	224.9
2012	229.6
2013	232.9
2014	236.7
2015	237.0
2016	240.0
2017	245.1
2018	251.1
2019	255.6

1. From the table above, calculate the inflation rate from 2015 to 2016 (5 points)

2. Use the table above to answer:  If you were earning $40,000/year in 2012, how much would you need to be earning in 2019 to have the same purchasing power?. (5 points)

3. Use the table above to answer:  If average college tuition was $10,000 per year in 2010, what would that be equivalent to in 2019? (5 points)

4. Price inflation in 2021 is expected to be 3%, but because of an economic slowdown as the result of COVID shutdowns, inflation in 2021 was actually only 1%.  

Hourly-wage worker agrees on January 1, 2021, to a three-year union contract at a local factory. A fixed cost-of-living adjustment (COLA) of 3 percent per year is built into the contract.

Is the worker a winner or a loser? (4 points)

Answer 1

To calculate the inflation rate from 2015 to 2016, we will just calculate the percentage change in the CPI from 2015 to 2016

= (CPI2016 - CPI2015)/CPI2015

= (240 - 237)/237

=0.012658

= 1.27%

By looking at the CPI, you can say that $229.6 in 2012 is equal to $255.6 in 2019. so $40,000 in 2012 is equal to

$40,000 * 255.6/229.6

= $44529.617

$40,000 is 2012 is equal to 44529.617 in 2019

The college tuition fee was $10,000 in 2010 and the question is asking the value of that in 2019,

= 10,000 * 218.1/255.6

= $8532.86

The workers are winners, they will get a 3% raise while their cost of living will rise only by 1%. Say they were earning and spending $100, now their expenses will rise to $101 but their income will rise to $103