Question

If your nominal wage rises from $10 to $12 while the CPI rises from 150 to 180 will your real wage increase, decrease, or stay the same?

A. Stay the same B. Decrease C.
Increase​

Answer 1

A. Stay the same

Step-by-step explanation:

We need to compare the rate of price change and the rate of inflation.

Rate of price change = $12 - $10 x 100

$10

=2/10 x 100

=0.2 x 100

=20%

inflation rate= CPI year 2​- CPI year 1 x 100 %

CPI year 1​​

=180 -150 x 100

150

=30/150 x 100

=0.2 x 100

=20%

The price change are the inflation rate are the same.The real wages will stay the same