Minneapolis, MN has a CPI of 173 . Anchorage, AK has a CPI of 226 . How does the purchasing power of someone in Minneapolis earning a salary of \( \$ 42,500 \) compare to the purchasing power of someone in Anchorage earning a salary of \( \$ 67,000 \) ? a. The person living in Minneapolis has \( \$ 57.61 / \mathrm{CPI} \) more than the person in Anchorage. b. The person living in Minneapolis has \( \$ 130.45 / \mathrm{CPI} \) more than the person in Anchorage. c. The person living in Anchorage has \( \$ 50.80 / \mathrm{CPI} \) more than the person in Minneapolis. d. The person living in Anchorage has \( \$ 90.82 / \mathrm{CPI} \) more than the person in Minneapolis.
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To compare the purchasing power of the two individuals, we first need to adjust their salaries based on their respective CPIs. In Minneapolis, the purchasing power can be calculated as: \[ \text{Purchasing Power in Minneapolis} = \frac{42,500}{173} \approx 245.13 \] In Anchorage, the purchasing power can be calculated as: \[ \text{Purchasing Power in Anchorage} = \frac{67,000}{226} \approx 296.91 \] Now, subtract the two values to find the difference in purchasing power: \[ 296.91 - 245.13 \approx 51.78 \] Thus, the person living in Anchorage has more purchasing power than the person in Minneapolis. The best answer choice that closely resembles this calculation is: c. The person living in Anchorage has \( \$ 50.80 / \mathrm{CPI} \) more than the person in Minneapolis. Just remember, these kinds of calculations help you understand the real value of salary when comparing different locations! Adjustments for the cost of living can be crucial if you’re thinking about a move or job offer! Also, keep in mind that CPI reflects the cost of living and inflation, which can change over time. Always check for the latest data when making important financial decisions!
