Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Question
What is the percentage change in real average earnings from 1965 to 2010?

Transcribed Image Text:Nominal
Average Hourly CPI (1982-1984
= 100)
32
219
Year
Earnings
1965
$2.65
2010
22.59
The table above reports the nominal average hourly earnings in private industry and the consumer price index for 1965 and 2010.
Expert Solution

Step 1
The real average earnings refer to the amount of money people earn after adjusting for inflation so that the value of their wages or salaries remains constant over time. This measurement provides a more accurate picture of changes in purchasing power and standard of living, as it accounts for changes in the cost of goods and services. The real average earnings are typically lower than the nominal average earnings, as inflation reduces the purchasing power of money over time.
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