$$\begin{array}{l}
\begin{array} { | c | c | c | }
\hline \text { Year } & \begin{array} { c }
\text { Antonio's Nominal } \
\text { Hourly Wage }
\end{array} & \begin{array} { c }
\text { Consumer Price } \
\text { Index }
\end{array} \
\hline 2006 & \$ 8.40 & 201.6 \
\hline 2010 & \$ 9.05 & 218.1 \
\hline
\end{array}\
\text { Table } 8.2
\end{array}$$ Refer to Table 8.2.From 2006 to 2010,Antonio received a total of $0.65 in pay raises,and the CPI also increased as shown in the table.What happened to Antonio's real wage from 2006 to 2010?
A) It rose because $9.05 is greater than $8.40.
B) It rose because Antonio's nominal wage and the CPI were both higher in 2010 than in 2006.
C) It fell because Antonio's nominal wage rose more slowly than did the CPI.
D) It fell because the change in the CPI was 16.5, which is greater than Antonio's wage.

Question

$$\begin{array}{l}
\begin{array} { | c | c | c | } 
\hline \text { Year } & \begin{array} { c } 
\text { Antonio's Nominal } \
\text { Hourly Wage }
\end{array} & \begin{array} { c } 
\text { Consumer Price } \
\text { Index }
\end{array} \
\hline 2006 & \$ 8.40 & 201.6 \
\hline 2010 & \$ 9.05 & 218.1 \
\hline
\end{array}\
\text { Table } 8.2
\end{array}$$ Refer to Table 8.2.From 2006 to 2010,Antonio received a total of $0.65 in pay raises,and the CPI also increased as shown in the table.What happened to Antonio's real wage from 2006 to 2010?
A) It rose because $9.05 is greater than $8.40.
B) It rose because Antonio's nominal wage and the CPI were both higher in 2010 than in 2006.
C) It fell because Antonio's nominal wage rose more slowly than did the CPI.
D) It fell because the change in the CPI was 16.5, which is greater than Antonio's wage.

Quizplus · Accepted Answer

To determine the change in real wage, we compare the rate of increase in nominal wage to the rate of increase in the Consumer Price Index (CPI). Antonio's nominal wage increased from $8.40 to $9.05, which is a smaller percentage increase than the CPI's increase from 201.6 to 218.1. This means Antonio's purchasing power, or real wage, decreased because the cost of living (as measured by the CPI) increased faster than his nominal wage.