Question

A report found that the real entry-level wage for college graduates declined by 6 percent between 2003 and 2010.

Answer 1

Answer: The answer is as follows:

Explanation:

Given that,

Real entry-level wage declined by 6% between 2003 and 2010

2010 Nominal Entry-Level Wage = $13.50

2010 CPI = $170.2

2003 CPI = 142.5

(a) Real entry wage in 2010 = $\frac{2010\ Nominal\ entry\ level\ wage}{2010\ CPI}$

= $\frac{13.50}{170.2}$

= $7.93

The 2010 Real entry-wage level is $7.93

2010 real wage declined by 6% from 2003

( b) The 2003 real entry-wage level is $8.43

Therefore, real entry-level wage in 2003 =  $\frac{7.93}{94%}$

= $8.43

(c) 2003 nominal entry-level wage in CPI term = $2003\ real\ entry\ wage \times \frac{2003\ CPI}{100}$

= $8.43 \times \frac{142.5}{100}$

= $12.01

The 2003 nominal entry-wage is $ 12.01