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. Average hourly earnings 1980 1990 2009 2019 $7.5 $8.5 $20.0 $30. Consumer Price Index (CPI) of 1970 as a base 80.4 120.0 210.5 400 Using the information presented in the table, answer the following questions: 1. Calculate the real wage for every year. Give the economic interpretation for each ion value. 2. What is the change rate of earnings between 1980-1990, 1990-2009, and 2009-2019. 3. If the CPI in 2010 was 215, what was that year's inflation rate? 4. 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 2 Ls Ld L 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: 5. Find the supply and demand equations. 6. Determine the excess labour supply if the wage is 6. Discuss the implications of a $6 wage in this market. 7. Determine the excess labour demand if the wage is 3. Discuss the implications of a $3 wage in this market. 8. Explain what will happen with the workers and employer surplus if the wage decreases to 2. 9. Explain what will happen with the workers and employer surplus if the wage increases to 10. 10. Determine the worker and employer surplus in the market clearing point. 11. What would the substitution effects be in the short run in this market if the output demand increases? 12. Show graphically what would happen with the equilibrium wage and equilibrium employment if the output demand increases.
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. Average hourly earnings 1980 1990 2009 2019 $7.5 $8.5 $20.0 $30. Consumer Price Index (CPI) of 1970 as a base 80.4 120.0 210.5 400 Using the information presented in the table, answer the following questions: 1. Calculate the real wage for every year. Give the economic interpretation for each ion value. 2. What is the change rate of earnings between 1980-1990, 1990-2009, and 2009-2019. 3. If the CPI in 2010 was 215, what was that year's inflation rate? 4. 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 2 Ls Ld L 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: 5. Find the supply and demand equations. 6. Determine the excess labour supply if the wage is 6. Discuss the implications of a $6 wage in this market. 7. Determine the excess labour demand if the wage is 3. Discuss the implications of a $3 wage in this market. 8. Explain what will happen with the workers and employer surplus if the wage decreases to 2. 9. Explain what will happen with the workers and employer surplus if the wage increases to 10. 10. Determine the worker and employer surplus in the market clearing point. 11. What would the substitution effects be in the short run in this market if the output demand increases? 12. Show graphically what would happen with the equilibrium wage and equilibrium employment if the output demand increases.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text: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.
Average hourly earnings
1980
1990 2009
2019
$7.5
$8.5
$20.0
$30.
Consumer Price Index (CPI) of 1970 as a base 80.4
120.0
210.5
400
Using the information presented in the table, answer the following questions:
1. Calculate the real wage for every year. Give the economic interpretation for each ion value.
2. What is the change rate of earnings between 1980-1990, 1990-2009, and 2009-2019.
3. If the CPI in 2010 was 215, what was that year's inflation rate?
4. 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
2
Ls
Ld
L
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:
5. Find the supply and demand equations.
6. Determine the excess labour supply if the wage is 6. Discuss the implications of a $6 wage in
this market.
7. Determine the excess labour demand if the wage is 3. Discuss the implications of a $3 wage in
this market.
8. Explain what will happen with the workers and employer surplus if the wage decreases to 2.
9. Explain what will happen with the workers and employer surplus if the wage increases to 10.
10. Determine the worker and employer surplus in the market clearing point.
11. What would the substitution effects be in the short run in this market if the output demand
increases?
12. Show graphically what would happen with the equilibrium wage and equilibrium employment
if the output demand increases.
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