1. Let’s say your grandmother made $15,000 per year in 1964 and your mother makes $37,000 per year in 2011 and you want to know who made/makes more so you know who to love the most. You can convert grandma’s actual $15,000 salary to 2011 Constant Dollars and see if it’s higher or lower than your mother’s.

2. Grandma wins as her converted to 2011 constant dollar salary is larger than your mom’s actual salary GrandmaMom 1964 $ 15,000.00 nothing 2011 $108,822.58 $37,000.00

3. Your grandma continues emphatically: “I’ve made $15,000 every year since!” You need to demonstrate to her that this is not good; that her buying power has decreased. We can convert each of those years’ salaries to 2011 constant dollars to demonstrate this.

4. Graphing Electricity Prices (US city average, per KWH) YearPrice 1986$0.077 1987$0.079 1988$0.080 1989$0.082 1990$0.084 1991$0.087 1992$0.088 1993$0.092 1994$0.092 1995$0.094 1996$0.094 1997$0.094 Has electricity become more expensive?

5. Actual Dollar

6. To Constant Dollar 1997 Price To see the relative expense of electricity in 1986 in terms of 1997 dollars….

7. ABCD 1Electricity Prices (US city average, per KWH) 21986$0.077109.60 =$C$13/C2*B2 31987$0.079113.60 $ 0.112 41988$0.080118.30 $ 0.109 51989$0.082124.00 $ 0.106 61990$0.084130.70 $ 0.103 71991$0.087136.20 $ 0.102 81992$0.088140.30 $ 0.101 91993$0.092144.50 $ 0.102 101994$0.092148.20 $ 0.100 111995$0.094152.40 $ 0.099 121996$0.094156.90 $ 0.096 131997$0.094160.50 $ 0.094

8. Better Portrayal of the Price of Electricity

9. We saw what the graph looked like when the constant dollar price of Electricity went down relative to the rate of inflation. What would the constant dollar graph look like if electricity increased at the same rate as inflation?