Table 2.2 Workers in the Widget Industry
$$\begin{array} { l c r }
\hline \text { Year } & \text { Earnings } & \text { CPI } \
\hline 1966 & \$ 8,000 & 60 \
1976 & \$ 15,000 & 100 \
1986 & \$ 22,500 & 178 \
1996 & \$ 30,000 & 205 \
\hline
\end{array}$$
-According to Table 2.2,in which year were the real earnings of workers in the Widget Industry highest?
A) 1966
B) 1976
C) 1986
D) 1996

Question

Table 2.2 Workers in the Widget Industry
 $$\begin{array} { l c r } 
\hline \text { Year } & \text { Earnings } & \text { CPI } \
\hline 1966 & \$ 8,000 & 60 \
1976 & \$ 15,000 & 100 \
1986 & \$ 22,500 & 178 \
1996 & \$ 30,000 & 205 \
\hline
\end{array}$$
-According to Table 2.2,in which year were the real earnings of workers in the Widget Industry highest?
A) 1966
B) 1976
C) 1986
D) 1996

Quizplus · Accepted Answer

To find the year with the highest real earnings, we adjust the nominal earnings for inflation using the Consumer Price Index (CPI) and compare the adjusted earnings across years. Real earnings are calculated by dividing the nominal earnings by the CPI (then multiplying by 100 to adjust for the base year). For each year:- 1966: $ \frac{8000}{60} \times 100 = 13333.33 $- 1976: $ \frac{15000}{100} \times 100 = 15000 $- 1986: $ \frac{22500}{178} \times 100 = 12640.45 $- 1996: $ \frac{30000}{205} \times 100 = 14634.15 $Therefore, the real earnings were highest in 1976.

Table 22 Workers in the Widget Industry -According to Table 2