Table 5-7 shows a mechanic's hourly wage and the respective price indexes for the years 1975 and 2005. Use the table to answer questions .
Table 5-7

-Refer to Table 5-7. Calculate a mechanic's real wage in 2005.

Question

Table 5-7 shows a mechanic's hourly wage and the respective price indexes for the years 1975 and 2005. Use the table to answer questions .
Table 5-7
 
-Refer to Table 5-7. Calculate a mechanic's real wage in 2005.

Quizplus · Accepted Answer

The real wage is calculated by adjusting the nominal wage for inflation. If the nominal wage in 2005 is $40 and the price index is 152 (assuming 1982-1984 = 100), the real wage is $40 / (152/100) = $26.25.

Table 5-7 Shows a Mechanic's Hourly Wage and the Respective