2) The United States Census Bureau, Statistical Abstract of the United States 1999 (p. 877) contains a table listing median family income for each year from 1947 to 1997. The incomes are presented in current dollars and in constant (1997) dollars. As an example, the median income in 1985 in current dollars was $27,735 and in constant (1997) dollars it was $41,371. The CPI in 1985 was 107.6 and in 1997, it was 160.5.

a) Explain what is meant by in constant (1997) dollars. Show your work by using the CPI in 1985 and 1997.

b) Suppose that the median family income in 1997 was $44,568. Adjust it to the equivalent median family income in 1985 and compare it to the median family income in 1985 in current dollars. Report the percent increase or decrease from 1985 to 1997.