Question

According to the following data, 2000 2019 Average hourly wage $14 $23 CPI 170 254 a. by what percentage did nominal wages increase between 2000 and 2019? b. by what percentage did consumer prices increase between 2000 and 2019? c. Did real wages increase between 2000 and 2019?

Answer 1

Explanation:

The computations are shown below:

a. The percentage change in nominal wages increase is

= ($23 - $14) ÷ ($14)

= ($9)  ÷ ($14)

= 64%

b. The percentage change in consumer price increase is

= (254 - 170) ÷ (170)

= (84)  ÷ (170)

= 49.41%

c. Now the real wages increase would be

For increase in real wages, first we have to find out the real wages i.e shown below:

= ($14 × 254) ÷ (170)

= $20.92

And, the current hourly wage rate is $23

So, the difference is

= $23 - $20.92

= $2.08

Now the increase in wage rate is

= ($2.08 ÷ $14) × 100

= 14.85%