Question

In 1977, each player on the losing team (Los Angeles Dodgers) in the World Series earned $21,000. In 2018, players on the losing team (again the Dodgers) in the World Series earned $320,000 each. CPI for October 1977 is 61,600 and for October 2018 is 252,794. (a) Who made more in real terms, the losing players in the 1977 or 2017 World Series? (b) How much have prices risen over this time period? Chapter 1 concepts

Answer 1

Nominal earnings in 1977 = 21000. Nominal earnings in 2018 = 320000. CPI in 1977 = 61.600. CPI for 2018 = 252.794

a) Real earnings of 1977 at 2018 prices = 21000 x 252.794 / 61.600 = $86,180. Real earnings of 2018 = 320,000. Hence the losing players in the 2017 World Series made more in real terms

b) Prices have risen over this period by (252.794 - 61.600)*100/61.600 = 310.38%.