High School

The CPI in 1970 was 38.8. The CPI in 2007 was 207.3.

The purchasing power of $50,000 in 1970 was __________ the purchasing power of $200,000 in 2007.

Please select the best answer from the choices provided:

A. less than
B. more than
C. the same as
D. not comparable to

Answer :

Final answer:

The purchasing power of $50,000 in 1970 was equivalent to about $267,422.68 in 2007, which is more than $200,000. So, the correct answer is b. more than.

Explanation:

To determine whether the purchasing power of $50,000 in 1970 was less than, more than, or the same as the purchasing power of $200,000 in 2007, we can use the Consumer Price Index (CPI) for those years. The CPI measures the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services. According to the provided information, the CPI in 1970 was 38.8 and in 2007 it was 207.3. We can calculate the purchasing power equivalence using the ratio of the two CPI values.

To find out the equivalent purchasing power of $50,000 in 1970 for the year 2007, you would perform the following calculation:

($50,000 / 38.8) * 207.3 = $267,422.68 approximately.

This calculation shows that $50,000 in 1970 had the purchasing power of about $267,422.68 in 2007. Since this amount is more than $200,000, it indicates that the purchasing power was more than $200,000 in 2007. Therefore, the correct answer to the student's question is b. more than.