Answer:
Explanation:
Real wage is defined as the nominal wage divided by the general price level, CPI. It is also the purchasing power of nominal wage.
Nominal wages are the wages received by a worker in the form of money.
Given:
In 2000:
Amelia nominal salary = $7,200 per week. CPI = 0.418
In 2020:
Amelia nominal salary = $35,000 per week
CPI = 2.40
Where CPI is an inflation measure.
Real salary = salary /(1 + inflation rate)
Inflation rate = (CPI2 - CPI1)/CPI1 × 100
Real salary I = salary/CPI
Real salary in 2000 = 7200/0.418
= $17224.88 per week
Real salary in 2020 = 35000/4.74
= $7384 per week
Nominal salary in 2000 compared to that in 2020,
Finding the difference = $7200 - $35000
= -$27800 per week
Real salary in 2000 compared to that in 2020,
Finding the difference = $17224.9 - $7384
= $9840.9 per week
