Convert the nominal wage rates in the following table to real wage rates. The formula is Real = (Nominal/Price Index) x 100. In the table below, the CPI or Consumer Price Index is the Price Index to use in the formula. When you are converting a nominal number into a real number, getting rid of the effects of inflation, your resulting real number should be in the same units as the original nominal number. It should also be in the same general magnitude, unless you are going back hundreds of years of looking at a country that has experienced unusually high rates of inflation. In other words, when you convert the nominal wage rate of $7.25 into a real wage rate, you should come up with something close to $7.25, such as $4.04 or $9.56. If you get an answer of $.04, then you know you made a mistake. 197619811989199720062010Nominal Minimum Wage$2.30$3.35$3.35$5.15$5.15$7.25CPI56.990.9124.0160.5201.6219.2Real Minimum Wage

Nominal wage: It refers to the actual dollar amount that an individual receives as compensation for…

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ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Convert the nominal wage rates in the following table to real wage rates. The formula is Real = (Nominal/Price Index) x 100. In the table below, the CPI or Consumer Price Index is the Price Index to use in the formula. When you are converting a nominal number into a real number, getting rid of the effects of inflation, your resulting real number should be in the same units as the original nominal number. It should also be in the same general magnitude, unless you are going back hundreds of years of looking at a country that has experienced unusually high rates of inflation. In other words, when you convert the nominal wage rate of $7.25 into a real wage rate, you should come up with something close to $7.25, such as $4.04 or $9.56. If you get an answer of $.04, then you know you made a mistake.

	1976	1981	1989	1997	2006	2010
Nominal Minimum Wage	$2.30	$3.35	$3.35	$5.15	$5.15	$7.25
CPI	56.9	90.9	124.0	160.5	201.6	219.2
Real Minimum Wage

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