How to I convert the value of goods & services purchased in the past into todays dollars?

For example: if an individuals salary in 1990 was $40,000 per year - what is the value in year 2007 dollars? Or, if a computer cost $2,000 in 1995 what is its value in year 2007 dollars?

Answer:
The Consumer Price Index is one way to go... If you want a pretty accurate number that is a good way.

For the U.S. quick rule of thumb though, is assume 2% inflation per year thus:

Price Then = (1 + .02)^(change in year) * Price Now

So for the computer:

2000 = 1.02^12 * price now
2000 / 1.268 = 1576.99

So a computer you paid 2000 for in 1995 is worth 1576 today.

You can also go the other way, if, for instance, you wanted to know what someone making 40k in 1990 would have to make now to be making the "same" amount of money:

$ then * (1 +.02)^(years) = $ now

40000 * 1.02^17 = 56000

So you would have to make 56k today to have the same purchasing power...

You should multiply the price or cost in the earlier year by the percentage increase in the consumer price index from the earlier year until today.

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How to I convert the value of goods & services purchased in the past into todays dollars?

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