Question

You are working at the campus bookstore, earning $9.00 per hour. Your manager tells you that in the upcoming year, you will get a 2% raise.
a. What is the approximate change in your real wage if inflation is 1%?
b. What is the approximate change in your real wage if inflation is 2%?
c. What is the approximate change in your real wage if inflation is 3%?

Answer 1

Answer:

a. $0.09

b. $0

c. -$0.09

Explanation:

Real rate = Nominal rate - inflation rate

a. Real rate = 2% - 1%

= 1%

Change in real wage = 9 * 1% = $0.09

b. = 2% -2% = 0%

Change in real wage = 9 * 0% = 0

c. = 2% - 3%

= -1%

Change in real wage = 9 * -1% = -$0.09