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1 January, 13:17

A report indicated that the average real wage in manufacturing declined by 2 percent between 1990 and 2000. If the CPI equaled 1.30 in 1990, 1.69 in 2000, and the average nominal wage in manufacturing was $35 in 2000, what was the average nominal wage in manufacturing in 1990?

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  1. 1 January, 15:00
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    W = $27.34

    Explanation:

    Given dа ta:

    Percentage Decline in average income is = 2%

    CPI in 1990 1.30

    CPI in 2000 is 1.69

    Average nominal wage is 2000 is $35

    Inflation rate is given as

    Inflation rate = % Change in CPI

    = (1.69 / 1.3) - 1

    = 1.3 - 1 = 0.3 = 30%

    Real wage = Nominal wage / Price level, hence

    Percentage change in real wage = % Change in (nominal wage - inflation rate)

    -2% = % Change in nominal wage - 30%

    % Change in nominal wage = 28%

    let nominal wage in 1990 is w

    W/times 1.28% = $35

    solving for W = $27.34
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