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The BLS reports median weekly earnings for full time workers . In 1980, weekly earnings was $259. The weekly earnings in 1980 expressed in 1983 prices is $311.
In 2020, weekly earnings was $984. The weekly earnings in 2020 expressed in 1983 prices is$377.
(a) Calculate weekly earnings in 1980 expressed in 2020 prices
(b) b) Calculate average annual inflation from 1980-2020.

Respuesta :

Using proportions, it is found that:

a) In 2020 prices, the weekly earnings in 1980 were of $314.

b) The average annual inflation during this period was of 3.03%.

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Item a:

  • $259 in 1980 is worth $311 in 1983.
  • In 2020 prices, $311 is worth $377. How much is $259 worth?

The rule of three is:

$311 - $377

$259 - x

Applying cross multiplication:

[tex]311x = 377 \times 259[/tex]

[tex]x = \frac{377 \times 259}{311}[/tex]

[tex]x = 314[/tex]

In 2020 prices, the weekly earnings in 1980 were of $314.

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Item b:

  • The ratio of $314 and $259 is:

[tex]\frac{314}{259} = 1.21235[/tex]

  • Considering equal change for the 2020 - 1980 = 40 years.

[tex]\frac{1.21235}{40} = 0.0303[/tex]

0.0303*100% = 3.03%

The average annual inflation during this period was of 3.03%.

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