Amelia Earhart's nominal wages rose from $40,000 to $50,000,while the CPI rose by 20%.Her real wages

Question

Quizplus · Accepted Answer

To calculate the real wages we need to adjust the nominal wages for inflation. Since CPI rose by 20%, we need to multiply the initial nominal wage by (1+0.20) to get the equivalent nominal wage in today's dollars.

Nominal wage in today's dollars = Nominal wage x (1+inflation rate)
Nominal wage in today's dollars = $40,000 x (1+0.20) = $48,000

Since Amelia Earhart's nominal wages actually rose to $50,000, this means that her real wages increased as well. Therefore, the answer is A) rose.

Amelia Earhart's Nominal Wages Rose from $40,000 to $50,000,while the CPI