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4.2 Inflation & the Consumer Price Index

4.2 Inflation & the Consumer Price Index
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  • 1. Consumer Price Index

    What is the percent increase in the CPI for the following years? (See Example 1.)

    1. From 1978 to 1981
    2. From 1978 to 1997
    3. From 1990 to 2009
    4. From 1978 to 2009

    • Worked-Out Solution
      1. From 1978 to 1981, the CPI rose from 65.2 to 90.9. This is a percent increase of

      2. From 1978 to 1997, the CPI rose from 65.2 to 160.5. This is a percent increase of

      3. From 1990 to 2009, the CPI rose from 130.7 to 214.5. This is a percent increase of

      4. From 1978 to 2009, the CPI rose from 65.2 to 214.5. This is a percent increase of

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    | // __    | / \ ||   \   //   | ||__    |    \\  
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     \____//    \___//   /_//\_\\  |_____||  |  __//  
      `---`     `---`    `-`  --`  `-----`   |_|`-`   
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    Cody (moderator)6 years ago |
    Some people argue that increasing the minimum wage is actually counterproductive. I have seen some good arguments both for and against increasing the minimum wage. What do you think?
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  • 2. Minimum Wage

    The table shows the federal minimum hourly wage in the years that the wage changed since 1978. What is the percent increase in the federal minimum hourly wage for the following years? (See Example 1.)

    1. From 1978 to 1981
    2. From 1978 to 1997
    3. From 1990 to 2009
    4. From 1978 to 2009

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      _  __     ___    __    __     ___      _____   
     | |/ //   / _ \\  \ \\ / //   / _ \\   / ____|| 
     | ' //   / //\ \\  \ \/ //   / //\ \\ / //---`' 
     | . \\  |  ___  ||  \  //   |  ___  ||\ \\___   
     |_|\_\\ |_||  |_||   \//    |_||  |_|| \_____|| 
     `-` --` `-`   `-`     `     `-`   `-`   `----`  
                                                     
    
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  • 3. Comparing Minimum Wage and Inflation

    During which of the time periods in Exercises 1 and 2 did the buying power of the federal minimum hourly wage outpace inflation? Explain your reasoning. (See Example 1.)

    • Worked-Out Solution

      Begin by making a table that compares the percent increase in the consumer price index with the percent increase in the minimum wage.

      From this table, you can see that the minimum wage kept up with inflation during the time period from 1990 to 2009. During each of the other time periods, the minimum wage did not keep up with inflation.

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     _    _      ___     __   __     ___     _    _   
    | |  | ||   / _ \\   \ \\/ //   / _ \\  | \  / || 
    | |/\| ||  | / \ ||   \   //   / //\ \\ |  \/  || 
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    |_// \_||   \___//   /_//\_\\ |_||  |_|||_|\/|_|| 
    `-`   `-`   `---`    `-`  --` `-`   `-` `-`  `-`  
                                                      
    
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  • 4. Changes in Minimum Wage

    Do changes in the federal minimum hourly wage depend on the CPI? Explain your reasoning. (See Example 1.)

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      _____    __   __   __   __    ______            
     |__  //   \ \\/ //  \ \\/ //  /_   _//   ____    
       / //     \ ` //    \   //    -| ||-   |    \\  
      / //__     | ||     / . \\    _| ||_   | [] ||  
     /_____||    |_||    /_//\_\\  /_____//  |  __//  
     `-----`     `-`'    `-`  --`  `-----`   |_|`-`   
                                             `-`      
    
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  • 5. Starting Wage

    The starting wage at a company in 1992 was $14.50 per hour. In 2010, the starting wage was $21.25 per hour. Did the starting wage at the company keep up with inflation? Explain your reasoning. (See Example 2.)

    • Worked-Out Solution

      Begin by making a table that compares the consumer price index with the starting wage.

      From 1992 to 2010, the CPI had a percent increase of

      From 1992 to 2010, the starting wage had a percent increase of

      So, the starting wage did not keep up with inflation.

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                _____      _____    ______   __   _   
      ____     |  ___||   / ___//  /_   _// | || | || 
     |    \\   | ||__     \___ \\   -| ||-  | '--' || 
     | [] ||   | ||__     /    //   _| ||_  | .--. || 
     |  __//   |_____||  /____//   /_____// |_|| |_|| 
     |_|`-`    `-----`  `-----`    `-----`  `-`  `-`  
     `-`                                              
    
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  • 6. CEO Compensation

    In 1980, the compensation for a CEO at a company was $2.5 million. In 2010, the compensation for the CEO was $15 million. Did the compensation for the CEO keep up with inflation? Explain your reasoning. (See Example 2.)

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      _____    __   __    ______    _____     _____   
     |__  //   \ \\/ //  /_____//  |  ___||  / ____|| 
       / //     \ ` //   `____ `   | ||__   / //---`' 
      / //__     | ||    /___//    | ||__   \ \\___   
     /_____||    |_||    `__ `     |_____||  \_____|| 
     `-----`     `-`'    /_//      `-----`    `----`  
                         `-`                          
    
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