The formula to calculate the Buying Power is:
\[ BP = A \times (CY - RY) \times \frac{25.5}{100} \]
where \( BP \) is the Buying Power, \( A \) is the amount, \( CY \) is the current year, and \( RY \) is the reference year.
Buying power is a term used in macroeconomics to describe a currency’s effective purchasing power from one year to the next. In other words, it represents the equivalent amount that a dollar from a past year would be worth today. For example, if you had $1 back in 1913, the equivalent amount that dollar would be worth today in 2023.
Let's assume we have the following values:
Step 1: Subtract the reference year from the current year:
\[ CY - RY = 2023 - 1913 = 110 \]
Step 2: Multiply the amount by the difference in years and then by 25.5/100:
\[ BP = 100 \times 110 \times \frac{25.5}{100} = 2805 \]
Therefore, the Buying Power is \( BP = \$2805 \).
