Asked by Kennedy Brame on Jun 24, 2024
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Mr.Kohl made $44,000 in 2004,the base year.By 2010 he was earning $60,000.If the CPI had risen to 120 by 2010,how much were Mr.Kohl's real wages that year,and by what percentage had they changed?
CPI (Consumer Price Index)
An index that measures the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services.
Real Wages
Wages that have been adjusted for inflation, reflecting the actual purchasing power of the income earned from work.
Base Year
The base year is a specific point in time used as a reference or benchmark for economic or financial calculations, such as index numbers and inflation measurements.
- Compute actual wages after accounting for inflation and evaluate the variation in buying capacity over time.
- Utilize understanding of the consumer price index (CPI) to examine alterations in real income.
Verified Answer
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Benlevite Ben IsraelJun 29, 2024
Final Answer :
(a)
Real wages (2010)= Money wages (2010)CPI(2010)×100=$60,000120×100=$50,000\begin{aligned}\text { Real wages } ( 2010 ) & = \frac { \text { Money wages } ( 2010 ) } { \mathrm { CPI } ( 2010 ) } \times 100 \\& = \frac { \$ 60,000 } { 120 } \times 100 \\& = \$ 50,000\end{aligned} Real wages (2010)=CPI(2010) Money wages (2010)×100=120$60,000×100=$50,000 (b)
percentage change = change original number =$6,000$44,000=13.6%\begin{aligned}\text { percentage change } = \frac { \text { change } } { \text { original number } } & = \frac { \$ 6,000 } { \$ 44,000 } \\& = 13.6 \%\end{aligned} percentage change = original number change =$44,000$6,000=13.6%
Real wages (2010)= Money wages (2010)CPI(2010)×100=$60,000120×100=$50,000\begin{aligned}\text { Real wages } ( 2010 ) & = \frac { \text { Money wages } ( 2010 ) } { \mathrm { CPI } ( 2010 ) } \times 100 \\& = \frac { \$ 60,000 } { 120 } \times 100 \\& = \$ 50,000\end{aligned} Real wages (2010)=CPI(2010) Money wages (2010)×100=120$60,000×100=$50,000 (b)
percentage change = change original number =$6,000$44,000=13.6%\begin{aligned}\text { percentage change } = \frac { \text { change } } { \text { original number } } & = \frac { \$ 6,000 } { \$ 44,000 } \\& = 13.6 \%\end{aligned} percentage change = original number change =$44,000$6,000=13.6%
Learning Objectives
- Compute actual wages after accounting for inflation and evaluate the variation in buying capacity over time.
- Utilize understanding of the consumer price index (CPI) to examine alterations in real income.