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Math Help - Percent change in purchasing power

  1. #1
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    Oct 2009
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    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.
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  2. #2
    Junior Member
    Joined
    Jun 2009
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     \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.
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