This past Christmas Day, your friend Brian invited you to have dinner with his family, which you accepted. At the dinner table, Grandpa Alex (Brian’s grandfather) wondered aloud why Brian was still living in his parent’s basement (for a small rent) since he got a job two years ago after graduating with his bachelor’s degree. Grandpa Alex noted that in 1950 when he got his first job, after his Associate’s degree (which was not so common back then), his annual income was only $5,200. He was able to buy his own house and got married the year after. He feels that Brian is wasteful since he has not been able to get his own place with a current salary of $38,000/per annum.

Using the knowledge you have learned from this course, especially as concerns inflation, CPI calculation, and nominal vs. real values, explain to Grandpa Alex why Brian’s income does not have the same buying power as Grandpa Alex’s 1950 income.

The BLS’s CPI calculator found in the suggested extra reading folder of the “Start Here-Syllabus” tab will help you in this discussion.