1. Adjusting for inflation

Movie	Year	Domestic BO (M)
Gone With the Wind	1939	$198.7
Titanic	1997	$600.8

Sources: www.the-movie-times.com

Suppose the CPI is 180 in year 2003, 160 in year 1997 and 40 in year 1939.

Which one is the all-time box office movie (in 2003 dollar)?

1. Nominal income, price level and purchasing power

Suppose Jane gets a raise in salary of 10% and she finds that her cost of living (the price level) has increased by 15%, what happens to her purchasing power?

1. Which job should Jennifer take?

Scenario: Jennifer has two job offers:

1. Company A in NYC offers her $50,000
2. Company B in Indy offers her $48,000

Jennifer likes these two jobs equally and she is indifferent between a quieter life and a glamorous city life. Her dad, Bob tries to help her make decision. He has come across some CPI data for cities in the US in a magazine one day; CPI in NYC is 120 and CPI in Indy is 80.

i) Calculate the real income for each city given the offers.

ii) How much does Jennifer has to make in NYC just so she is as well off as she would be in Indy with $48,000? Which offer is better for Jennifer?