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 Average Nominal Wage (dollars) $6,950 13,390 25,640 36,510 49,005 51,488 Ave rage Real Wage Year 1967 1977 1987 1997 2007 2013 CPI (dollars) 32.8 59.6 112 157.9 203.6 229.8 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

a) Average real wage = Average nominal wage/CPI

1967=6950/0.328=21189.02

1977=13390/0.596=22466.44

1987=25640/1.12 = 22892.86

1997=36510/1.579 = 23122.22

2007=49005/2.036 = 24069.25

2013=51488/2.298=22405.57

b) The paycheck of the average worker was highest in 2103(highest nominal wage)

c) The purchasing power of the average worker was highest in 2007(highest real wage)