A report indicated that the average real wage in manufacturing declined by 2% between 1990 and 2000.If the CPI equaled 1.30 in 1990, 1.69 in 2000, and the average nominal wage in manufacturing was $35 in 2000, what was the average nominal wage in manufacturing in 1990?
A)$21.13
B)$26.40
C)$26.92
D)$27.47

Question

Quizplus · Accepted Answer

To find the average nominal wage in 1990, we first calculate the real wage in 2000 using the formula: Real Wage = Nominal Wage / CPI. The real wage in 2000 is $35 / 1.69 = $20.71. Since the real wage declined by 2%, the real wage in 1990 was $20.71 / 0.98 = $21.13. The nominal wage in 1990 is then $21.13 * 1.30 = $27.47.

A Report Indicated That the Average Real Wage in Manufacturing