According to the us census bureau wwwcensusgov the median...

According to the U.S. Census Bureau (www.census.gov), the median household income in the United States was $23,618 in 1985, $34,076 in 1995, $46,326 in 2005, and $49,276 in 2010. In purchasing power terms, how did family income compare in each of those four years? You will need to know that the CPI (multiplied by 100, 1982–1984 = 100) was 107.6 in 1985, 152.4 in 1995, 195.3 in 2005, and 218.1 in 2010. Instructions: Enter your responses rounded to two decimal places. Year Real Income 1985 $ 1995 $ 2005 $ 2010 $

Transcript

00:01 So here we're given a whole bunch of information.

00:02 We're given for different years, median income and the cpi, and we're asked to convert real income, right? so in general, real income is equal to nominal income times a ratio of prices, right? sorry, times the price in the base year over the price in the current year.

00:32 This should make a lot of sense because if this term is equal to one, then real income is equal to nominal income.

00:41 But if prices have gone up and normally, right, prices are going up, this term will be less than one, right? so, and if this term or sorry, this term will be greater than one.

00:54 Because, oh, i was right.

00:56 Sorry, less than one.

00:58 Because the bottom is going to be larger.

01:00 So this means that real income will be smaller than nominal income because nominal income has been exaggerated by rising prices.

01:08 Right.

01:08 So now all i have is a whole bunch of calculations to do.

01:12 It just says real income here.

01:13 I assume they want real income in $1982 because they gave that as the base year.

01:17 But if you want it in a different year it's the exact same formula so here we're going to have uh two three six one eight times the base year of a hundred over the current of a hundred and seven point six here we're going to have 34076 again the base year cpi is 100 over 152 .4 here we're going to have 4 -6 -3 -2 -6 times the base year of 100 over the current year price level, which is 3.

01:52 And here we're going to have 49276, the base year prices, the current year prices.

02:00 Now all i've got is a whole bunch of calculator time...

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