LSAT and Law School Admissions Forum

Get expert LSAT preparation and law school admissions advice from PowerScore Test Preparation.

Lesson help relating to our Advanced Logical Reasoning Course.
 T.B.Justin
  • Posts: 194
  • Joined: Jun 01, 2018
|
#62092
What does it mean to take account of inflation in constant dollars?
User avatar
 Dave Killoran
PowerScore Staff
  • PowerScore Staff
  • Posts: 4105
  • Joined: Mar 25, 2011
|
#62274
T.B.Justin wrote:What does it mean to take account of inflation in constant dollars?
Hi T,

It means to take into account the value of the dollar after inflation has been accounted for, which then allows you to compare values from different years.

For example, let's say someone was making $100,000 in 2000, and then in 2010 they were making $125,000. Without adjusting for inflation, they've increased their salary by 25%. But, when inflation over that period is accounted for, it turns out that $100,000 in 2000 has the same buying power as $128,000 in 2010 (full disclosure: I had to look that number up here https://data.bls.gov/cgi-bin/cpicalc.pl). So, what looks like a decent raise over time actually buys you $3000 less than you were able to buy in 2000. You didn't really get a raise, you went backwards!

Good question!
 T.B.Justin
  • Posts: 194
  • Joined: Jun 01, 2018
|
#62284
Hey Dave,

I truly appreciate your time. I have a follow up question.

So, in this instance, prices have outpaced this person's salary increase, and with an on average 2.5% raise each year, the inflation rate between 2000-2010 must have been higher than 2.5%, thus they have less purchasing power in 2010 than they had in 2000?

Get the most out of your LSAT Prep Plus subscription.

Analyze and track your performance with our Testing and Analytics Package.