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Formula for constant dollars


Posted by Arthur Bowman on December 29, 2000 2:39 PM

I'm doing a trends analysis based on the real dollar numbers, the same numbers but based on inflation, and the same numbers but in constant dollars. I'm not sure I know the formula for constant dollars.

My starting point is $674 in 1990. The following years are: $699 ('91), $721 ('92), $770 ('93), $792 ('94), $830 ('95), $868 ('96), $936 ('97), $996 (98) and $1,071 ('99).

To report inflated dollars, I begin with $674 in 1990 and multiply it by to total inflation over the reporting period. Therefore, the inflated dollars are: $674 ('90), $702.3 ('91), $723.4 ('92), $742.9 ('93), $763 ('94), $782 ('95), $804.7 ('96), $823.2 ('97), $836.4 (98) and $858.1 ('99).

How do I figure constant dollars? I've been told by one person that real dollas divided by total inflation equals constant dollars, but I'd like a second opinion. Any thoughts?

thanks,
bowman


Posted by Anonymous on December 29, 2000 5:56 PM

The person giving you advice is correct.