In an article
in the Wall Street Journal, a professor of financial planning
noted the effect of rising prices on purchasing power:
“Today, $2,000 a month seems reasonable [as an income
for a retired person in addition to the person’s Social Security
payments], but 40 years from now that’s going to be
three cups of coffee and a donut.” Suppose that currently
three cups of coffee and a donut can be purchased for
$10. The CPI in 2014 was 237. What would the CPI have
to be in 2054 for $2,000 to be able to purchase only three
cups of coffee and a donut? Assume that the prices of coffee
and donuts increase at the same rate as the CPI during
these 40 years.