Question

The table below lists hypothetical CPI and wage values for the United States from different decades. a. Complete the table by computing the real income for each year shown in the table. Instructions: Round your answers to two decimal places. Nominal and Real Income Year A verage Real Wage (dollars) $ 1967 1977 1987 1997 2007 2013 Average Nominal Wage (dollars) $ 7,30 14,244 27,494 39,232 51,822 54,885 CY CPI 35.2 63 119 168.9 216.9 244.4 Instructions: Enter the year using all four numbers (yyyy). b. Of the years listed above, the paycheck of the average worker was highest in c. Of the years listed above, the purchasing power of the average worker was highest in .

Answer 1

Since CPI = (Average Nominal Wage / Average Real Wage) x 100

=> Average Real Wage = (Average Nominal Wage / CPI) x 100

a)

Year	Average Naminal Wage	CPI	Average Real Wage
1967	7380	35.2	20965.91
1977	14244	63	22609.52
1987	27494	119	23104.20
1997	39232	168.9	23227.95
2007	51822	216.9	23892.12
2013	54885	244.4	22457.04

b)Since paycheck amount is Nominal Wage.

So, Highest Pay check amount is Year 2013

c)Since purchasing power is always defined by real wage.

So, Highest purchasing power is in year 2007