UpStudy Free Solution:

To compare the salaries in base period dollars, we need to adjust them for inflation using the Consumer Price Index (CPI). Here's how you can calculate it:

1. Convert Bryant's 1958 salary to base period dollars (2007 dollars):

\[\text { Bryant' s salary in 2007 dollars} = \left ( \frac { \text { CPI in 2007} } { \text { CPI in 1958} } \right ) \times \text { Bryant' s 1958 salary} \]

\[\text { Bryant' s salary in 2007 dollars} = \left ( \frac { 207.3} { 28.9} \right ) \times 142,998\]

\[\text { Bryant' s salary in 2007 dollars} \approx 10.81 \times 142,998\]

\[\text { Bryant' s salary in 2007 dollars} \approx 1,545,775.38\]

2. Convert Saban's 2007 salary to base period dollars (1958 dollars):

\[\text { Saban' s salary in 1958 dollars} = \left ( \frac { \text { CPI in 1958} } { \text { CPI in 2007} } \right ) \times \text { Saban' s 2007 salary} \]

\[\text { Saban' s salary in 1958 dollars} = \left ( \frac { 28.9} { 207.3} \right ) \times 4,000,000\]

\[\text { Saban' s salary in 1958 dollars} \approx 0.1394 \times 4,000,000\]

\[\text { Saban' s salary in 1958 dollars} \approx 557,600\]

So, the correct answer is:

b. Bryant's salary was \(1.025 \)million, Saban's was \(557,880\)

Supplemental Knowledge

The Consumer Price Index (CPI) is a crucial economic indicator used to adjust salaries, wages, and other monetary values for inflation. This adjustment allows for meaningful comparisons of purchasing power across different time periods. Here’s a deeper look into the concepts involved:

- Consumer Price Index (CPI): The CPI measures the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services. It is used to calculate inflation rates and adjust monetary values to reflect changes in purchasing power.

- Inflation Adjustment Formula:

- To convert an amount from an earlier period to base period dollars:

\[\text { Adjusted Amount} = \left ( \frac { \text { CPI in Base Period} } { \text { CPI in Earlier Period} } \right ) \times \text { Original Amount} \]

- Conversely, to convert an amount from a later period to earlier period dollars:

\[\text { Adjusted Amount} = \left ( \frac { \text { CPI in Earlier Period} } { \text { CPI in Later Period} } \right ) \times \text { Original Amount} \]

- Example Calculation:

- Suppose you want to compare salaries from different years using the CPI.

- For instance, converting Bryant's 1958 salary to 2007 dollars involves multiplying his original salary by the ratio of the CPI in 2007 to the CPI in 1958.

- Similarly, converting Saban's 2007 salary to 1958 dollars involves multiplying his original salary by the ratio of the CPI in 1958 to the CPI in 2007.

Gain greater economic understanding with UpStudy! Whether navigating inflation adjustments or delving deeper into indicators such as Consumer Price Index (CPI), UpStudy offers comprehensive resources that make complicated concepts much more straightforward.
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