Use the table below to find the real wage in 2008 (in 2007 dollars).
$$\begin{array} { | c | c | c | }
\hline \text { Year } & \text { Naminal Wage (M) } & \text { CPI } \
\hline 2007 & \$ 13.33 & 113.2 \
2008 & \$ 13.00 & 110.0 \
\hline
\end{array}$$
A) $13.00
B) $11.82
C) $14.30
D) $11.78
E) $11.48

Question

Use the table below to find the real wage in 2008 (in 2007 dollars).
$$\begin{array} { | c | c | c | } 
\hline \text { Year } & \text { Naminal Wage (M) } & \text { CPI } \
\hline 2007 & \$ 13.33 & 113.2 \
2008 & \$ 13.00 & 110.0 \
\hline
\end{array}$$
A) $13.00
B) $11.82
C) $14.30
D) $11.78
E) $11.48

Quizplus · Accepted Answer

To find the real wage in 2008 (in 2007 dollars), we need to adjust the nominal wage in 2008 by the change in CPI from 2007 to 2008.

Using the formula:

Real Wage (in 2007 dollars) = Nominal Wage (in 2008 dollars) x (CPI in 2007/CPI in 2008)

Real Wage (in 2007 dollars) = $13.00 x (113.2/110.0)

Real Wage (in 2007 dollars) = $13.00 x 1.029

Real Wage (in 2007 dollars) ≈ $11.82

Therefore, the best choice is B, $11.82.

Use the Table Below to Find the Real Wage in 2008