To compare the $1-an-hour your grandfather earned in 1950 with the $8-an-hour you earn today, you would need to:
A) simply compare $1-an-hour to $8-an-hour.
B) add the inflation rates in each year since 1950 until today and add this to your grandfather's wage.
C) calculate real wages in both 1950 and today.
D) calculate your grandfather's nominal wage in 1950 and compare it to your wage today.

Question

Quizplus · Accepted Answer

In order to compare the wages accurately, we need to consider the inflation rates that have occurred since 1950. Option C allows us to do this by calculating the real wages in both 1950 and today, which takes into account the impact of inflation. Option A is not accurate enough as it does not consider inflation. Option B is not necessary as it involves adding every year's inflation rate since 1950, which is not practical. Option D is not accurate enough as it only considers nominal wages, which do not account for inflation.

To Compare the $1-An-Hour Your Grandfather Earned in 1950 with the $8-An-Hour