Question

Arlo is offered a job in Des Moines, where the CPI is 60, and a job in New York, where the CPI is 125. Arlo's job offer in Des Moines is for $48,000. How much does the New York job have to pay in order for the two salaries to represent the same purchasing power?

Answer 1

Answer:

The correct answer is  $100,000.

Explanation:

CPI or Consumer Price Index uses a basket of goods approach that aims to compare a consistent base of products from year to year focusing on products that are bought and used by consumers daily.

In the example, we can solve the question by using the simple "rule of 3" considering that the purchasing power is directly proportional to the income received and the CPI of the place where we are located. We will have:

(48 000)/60=  x/125

125(48000) = 60(x)

x = 100000

So, a job in New York should offer $100,000 for the two salaries to represent the same buying power.

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