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CPI continued

CPI continued. Or … Cost of Living index continued. Graphing. Let’s say you make $100 every year for 10 years. Non Constant Dollar Graph. Non Constant vs. Constant Dollar.

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CPI continued

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  1. CPI continued Or … Cost of Living index continued

  2. Graphing Let’s say you make $100 every year for 10 years.

  3. Non Constant Dollar Graph

  4. Non Constant vs. Constant Dollar • Since the value of the dollar decreased each year, this graph is not a realistic depiction of your salary over this period. • Nominal cost or Non constant dollar cost is represented • Constant dollar cost is not represented

  5. Creating the Spreadsheet • Let’s say inflation brought the cost of living up 3% each year. • Is your $100 increasing or decreasing in value?

  6. Creating the Spreadsheet • How might you represent the 3% inflation on the excel spreadsheet?

  7. Creating the Spreadsheet Nice! We know that our $100 is decreasing in value, but can we see by how much?

  8. To Constant Dollar 2010 Salary • To translate what our 2000 salary would be if it were transported to 2010…. • To see the relative salary in 2000 in terms of 2010dollars….

  9. What if? • You got a 1% raise? • Non – Constant Dollar graph?

  10. 2010 Constant Dollar Graph?

  11. What if? • You got a 3% raise? • Non – Constant Dollar Graph? • Constant Dollar Graph?

  12. What if? • 4% raise? • Non – Constant Dollar Graph? • Constant Dollar Graph?

  13. Graphing Has electricity become more expensive?

  14. Problem???

  15. To Constant Dollar 1997 Price • To translate what our 1986 Price would be if it were transported to 1997…. • To see the relative expense of electricity in 1986 in terms of 1997 dollars….

  16. Better

  17. Scenario for Electricity • We saw what the graph looked like when the constant dollar price of Electricity went down relative to the cost of inflation. • What would the constant dollar graph look like if electricity increased at the same rate as inflation?

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