Question

Suppose General Electric paid its line workers $12 per hour in 2017 when the Consumer Price Index was 100. Suppose that deflation occurred and the aggregate price level fell to 84 in 2018.

a. GE needed to pay its workers $ order to keep the real wage fixed at $12. in 2018 in
b. GE needed to pay its workers $ in 2018 if it wanted to increase the real wage by 8 percent.
c. If GЕ kept the wage fixed at $12 per hour in 2018, in real terms, its workers got a % increase in wages.

Answer 1

To keep the real wage fixed at $12 in 2018, General Electric would need to pay its workers $14.29 per hour. To increase the real wage by 8 percent in 2018, General Electric would need to pay its workers $12.96 per hour. If GE kept the wage fixed at $12 per hour in 2018, its workers would have experienced a 16.67% decrease in wages in real terms.

Step-by-step explanation:

To keep the real wage fixed at $12 in 2018, General Electric would need to pay its workers $14.29 per hour. This can be calculated by dividing the initial wage ($12) by the subsequent Consumer Price Index (84) and multiplying by 100. The formula is: $12 / 84 x 100 = $14.29.

To increase the real wage by 8 percent in 2018, General Electric would need to pay its workers $12.96 per hour. This can be calculated by multiplying the initial wage ($12) by 1.08. The formula is: $12 x 1.08 = $12.96.

If GE kept the wage fixed at $12 per hour in 2018, its workers would have experienced a 16.67% decrease in wages in real terms. This can be calculated by subtracting the subsequent Consumer Price Index (84) from the initial Consumer Price Index (100), dividing by the initial Consumer Price Index (100), and multiplying by 100. The formula is: (100 - 84) / 100 x 100 = 16.67% decrease.