16.4k views
3 votes
Suppose the average worker's nominal wage has remained constant between 2005 and 2009. Between what two years was there the largest decrease in the average worker's real wage?

User Red Virus
by
7.8k points

1 Answer

2 votes

Final answer:

The largest decrease in the average worker's real wage between 2005 and 2009 likely occurred between 2008 and 2009, a period marked by the Great Recession, when inflation would typically increase while nominal wages remained constant.

Step-by-step explanation:

The question pertains to the change in the average worker's real wage between 2005 and 2009, given that the nominal wage remained constant. To find the largest decrease in real wages, we need to consider inflation during this period. Real wages account for the purchasing power of money, reflecting the effects of inflation. If the nominal wage is constant but inflation increases, real wages decline because each dollar earned can buy fewer goods and services.

According to the given information, the real minimum wage saw a decline after 2007 when the nominal wage remained unchanged. Since inflation typically erodes the value of money over time, the purchasing power of the nominal wage would have decreased between the years when inflation was highest. The question specifically asks for the period between 2005 and 2009, and it is known that the Great Recession occurred during 2008-2009, which likely caused a significant increase in inflation and a decline in real wages. Therefore, between 2008 and 2009, the average worker's real wage would have experienced the largest decrease.

User Sabnam
by
7.7k points