I. Nominal and real wages, CPI, and inflation The following table shows the nominal hourly earnings for workers in the private sector from 1980 to 2019. 1980 1990 2009 2019 Average hourly earnings $7.5 $8.5 $20.0 $30. Consumer Price Index (CPI) of 1970 as a base 80.4 120.0 210.5 400 1. 2. 3. 4. Using the information presented in the table, answer the following questions: (1.5 points) Calculate the real wage for every year. Give the economic interpretation for each value. (1 point) What is the change rate of earnings between 1980-1990, 1990-2009, and 2009-2019. (0.5 points) If the CPI in 2010 was 215, what was that year's inflation rate? (1 point) Using the values calculated in (1), explain the nominal and real wage variation across time. Are people richer? II. Supply and demand of labour W 10 5. 6. 7. 8. 9. 10. 11. 12. The previous graph shows the MARKET supply and demand of labour. The equilibrium wage and labour are $5 and 5, respectively. With this information, answer the following questions: (1 point) Find the supply and demand equations. (1 point) Determine the excess labour supply if the wage is 6. Discuss the implications of a $6 wage in this market. (1 point) Determine the excess labour demand if the wage is 3. Discuss the implications of a $3 wage in this market. (0.5 points) Explain what will happen with the workers and employer surplus if the wage decreases to 2. (0.5 points) Explain what will happen with the workers and employer surplus if the wage increases to 10. (0.5 points) Determine the worker and employer surplus in the market clearing point. (0.5 points) What would the substitution effects be in the short run in this market if the output demand increases? (1 point) Show graphically what would happen with the equilibrium wage and equilibrium employment if the output demand increases.
I. Nominal and real wages, CPI, and inflation The following table shows the nominal hourly earnings for workers in the private sector from 1980 to 2019. 1980 1990 2009 2019 Average hourly earnings $7.5 $8.5 $20.0 $30. Consumer Price Index (CPI) of 1970 as a base 80.4 120.0 210.5 400 1. 2. 3. 4. Using the information presented in the table, answer the following questions: (1.5 points) Calculate the real wage for every year. Give the economic interpretation for each value. (1 point) What is the change rate of earnings between 1980-1990, 1990-2009, and 2009-2019. (0.5 points) If the CPI in 2010 was 215, what was that year's inflation rate? (1 point) Using the values calculated in (1), explain the nominal and real wage variation across time. Are people richer? II. Supply and demand of labour W 10 5. 6. 7. 8. 9. 10. 11. 12. The previous graph shows the MARKET supply and demand of labour. The equilibrium wage and labour are $5 and 5, respectively. With this information, answer the following questions: (1 point) Find the supply and demand equations. (1 point) Determine the excess labour supply if the wage is 6. Discuss the implications of a $6 wage in this market. (1 point) Determine the excess labour demand if the wage is 3. Discuss the implications of a $3 wage in this market. (0.5 points) Explain what will happen with the workers and employer surplus if the wage decreases to 2. (0.5 points) Explain what will happen with the workers and employer surplus if the wage increases to 10. (0.5 points) Determine the worker and employer surplus in the market clearing point. (0.5 points) What would the substitution effects be in the short run in this market if the output demand increases? (1 point) Show graphically what would happen with the equilibrium wage and equilibrium employment if the output demand increases.
Macroeconomics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN:9781305506756
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Chapter8: Economic Fluctuations, Unemployment, And Inflation
Section: Chapter Questions
Problem 10CQ
Related questions
Question
Transcribed Image Text:I. Nominal and real wages, CPI, and inflation
The following table shows the nominal hourly earnings for workers in the private sector from
1980 to 2019.
1980
1990
2009
2019
Average hourly earnings
$7.5
$8.5
$20.0
$30.
Consumer Price Index (CPI) of 1970 as a base
80.4
120.0
210.5
400
1.
2.
3.
4.
Using the information presented in the table, answer the following questions:
(1.5 points) Calculate the real wage for every year. Give the economic interpretation for each
value.
(1 point) What is the change rate of earnings between 1980-1990, 1990-2009, and 2009-2019.
(0.5 points) If the CPI in 2010 was 215, what was that year's inflation rate?
(1 point) Using the values calculated in (1), explain the nominal and real wage variation across
time. Are people richer?
II.
Supply and demand of labour
W
10
5.
6.
7.
8.
9.
10.
11.
12.
The previous graph shows the MARKET supply and demand of labour. The equilibrium wage
and labour are $5 and 5, respectively. With this information, answer the following questions:
(1 point) Find the supply and demand equations.
(1 point) Determine the excess labour supply if the wage is 6. Discuss the implications of a $6
wage in this market.
(1 point) Determine the excess labour demand if the wage is 3. Discuss the implications of a $3
wage in this market.
(0.5 points) Explain what will happen with the workers and employer surplus if the wage
decreases to 2.
(0.5 points) Explain what will happen with the workers and employer surplus if the wage
increases to 10.
(0.5 points) Determine the worker and employer surplus in the market clearing point.
(0.5 points) What would the substitution effects be in the short run in this market if the output
demand increases?
(1 point) Show graphically what would happen with the equilibrium wage and equilibrium
employment if the output demand increases.
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