Question

In​ 1982-84 dollars, the real average hourly wage rate in 2003 was ​$8.28 and in 2004​, it was ​$8.24. In 2003​, the CPI was 184.0 and in 2004​, the CPI was 188.9. Calculate the nominal wage rate in 2003 and in 2004.

Answer 1

Answer:

The nominal wage in 2003 = $15.22

The nominal wage in 2004 = $15.565

Explanation:

Inflation = [ ( CPI of 2003 - CPI of base year ) ÷ CPI of Base year ] × 100

= [ ( 184 - 100 ) ÷ 100 ] × 100

= 84%

Therefore,

The wage will increase by this inflation to be nominal

= 8.28 × (1.84)

= $15.23

Similarly

Inflation = [ ( CPI of 2004 - CPI of base year ) ÷ CPI of Base year ] × 100

= [ ( 188.9 - 100 ) ÷ 100 ] × 100

= 88.9%

Therefore,

The wage will increase by this inflation to be nominal

= 8.24 × (1.889)

= $15.565

Hence,

The nominal wage in 2003 = $15.22

The nominal wage in 2004 = $15.565