a. Using the information below, and assuming that you want to maintain your purchasing power from 2011, what nominal wage should you demand in each of the given years? Instructions: Round your answers to 2 decimal places. CPI Values and Nominal Wages YearCPINominal Wage (dollars)2011211.7$78,5202012213.53 70902013223.82014221.1 b. Assume that your annual wage in 2014 was $82,920. This represents

a)

Year                CPI              Nominal Wage (dollars)

2011                 211.7                     $78,520

2012                213.5               = (213.5/211.7) x $78,520 = $79,187.62

2013                223.8              = (223.8/211.7) x $78,520 = $83,007.92

2014                221.1                = (221.1/211.7) x $78,520 = $82,006.48

b) if you annual wage in 2014 was $82,920, it would be equivalent to (211.7/221.1) x $82,920 = $79,394.68 in 2011.

The CPI can be used to calculate equivalent dollars and works both ways, to determine past or future equivalencies.

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