----- Original Message ---- From: Shane Mage <shmage at pipeline.com> To: lbo-talk at lbo-talk.org Sent: Monday, December 15, 2008 11:38:12 AM Subject: Re: [lbo-talk] How to do real dollar conversions?
On Dec 15, 2008, at 10:31 AM, Charles Turner wrote:
> On Mon, 15 Dec 2008 06:22:19 -0800 (PST), Wojtek Sokolowski wrote:
>> [WS:] Why not price indexes for personal consumption expenditures?
> http://www.bea.gov/national/nipaweb/TableView.asp?SelectedTable=64&Freq=Qtr&FirstYear=2006&LastYear=2
>
> Thanks. So if the "personal consumption expenditures" index was 23.237
> in 1967 and 117.659 in 2007, it looks like there's been a 94.422
> percent increase? So $100 in 1967 is $194.422 in 2007 dollars?
An increase from 23.2 to 117.7 is an increase of about 400% (117.7 divided by 23.2 equals about 5). So $100 in 1967 is $500 in 2007 dollars. This is equivalent to an average annual rate of increase over 40 years of a little more than 4%. (the rate of increase over time can be calculated mentally by estimating how many years it takes for each doubling of the original base and dividing 72 by that number).
[WS:] Right. The baseline year for that index is 2000, so $100 in 2000 was about $431 in 1967 (100/0.232) and $85 in 2007 (100/1.177). Make sure to divide the index number by 100 (to obtain decimal fractions) to do your price conversions.
Wojtek