Calculation of real and nominal wages

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Reference no: EM1313431

Real Changes in Wages

Pam, having recently graduated from college, is looking to work for 2 years before she enters graduate school. She has received 2 job offers with the following salary structures:

JOB A: Pays $30,000 in 2003 and $40,000 in 2004

JOB B: Pays $30,000 in 2003 and 2004\'s salary will be equal to $30,000 plus a cost of living adjustment equal to the inflation rate. Suppose the increase in the price level (i.e. the inflation rate) is 35% from 2003 to 2004. Suppose Pam has no preference for either job, other than the highest salary.

Which job should Pam take? Briefly explain

Reference no: EM1313431

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