# Percent change in purchasing power

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• October 18th 2009, 05:41 PM
cwsmaster2
Percent change in purchasing power
How would you calculate the percent increase or decrease in purchasing power when given the wages and index number.

Wages were $22000 four years ago, when the index was 104.$28000 today when the index is 110. The answer is 20.3%, not sure how you would calculate that.
• October 19th 2009, 10:38 AM
LochWulf
$\frac{28,000 \ \div \ 1.1}{22,000 \ \div \ 1.04} \ - \ 1 \ = 0.2033$

The numerator and denominator are both re-expressing the nominal wages back to their 'base-year' purchasing-power amounts. The rational comparison of the two shows a 20.33% increase in terms of purchasing power.