How can we define the real wage as nominal wage, Macroeconomics

Assignment Help:

How can we define the real wage as nominal wage

We define real wage as nominal wage divided by a price index (typically CPI). In the illustration above, your real wage was 20 in January and 21.36 in February if we use price of the basket as a price index. Remember that nominal wage will tell you your wage in units of currency whereas real wage will tell you your wage in baskets of goods and services and this is more important to us.

Hence we care about increases in real wages, not in nominal wages. If you found out that Ken, who works in another nation, got a 50% increase in his wage every year, you may initially be quite happy for Ken. If you then found out that inflation in country where Ken works is 70%, you should actually feel sorry for him. His real wage is 1.5/1.7 = 88% of his real wage the year before - a real wage cut by 12%.  

 


Related Discussions:- How can we define the real wage as nominal wage

Uncontrollable environmental variables, Consider an international firm you ...

Consider an international firm you are familiar with and what the firm needs to be concerned with when entering a foreign market. Specifically, in terms of the chapters you covered

Determine the net terminal year cash flow, A company is assessing a propose...

A company is assessing a proposed 4-year project.  The depreciable cost will involve the following: $300,000 for the equipment, $20,000 for shipping, and $30,000 for installation.

Macro, Difference between mec and mei.

Difference between mec and mei.

Private sector in the circular flow, Private sector in the circular flow ...

Private sector in the circular flow The private sector total income is known as the national income. Because private sector receives the entire return from the factors of pr

Find the investment arrangement of portfolio , A financial manager wants t...

A financial manager wants to design an investment portfolio for a client. The client has $50,000 available to invest, and the planner has identified four investment options for the

Graph the industry demand and supply, Construct two graphs that exhibit equ...

Construct two graphs that exhibit equilibrium in the petrol market - assume that there are no taxes. Clearly label the equilibrium values. (a) Graph the AFC, AVC, ATC, and MC fu

Firm make profits of losses with this quantity, The Marginal Costs (MC) for...

The Marginal Costs (MC) for a firm is given by the function MC=50x. Please find the Marginal Revenues (MR) for each of the following scenarios (if appropriate). Then, find the prof

Frequency distribution channel, The original data values cannot be determin...

The original data values cannot be determined once they are grouped into a frequency distribution channel?

Taxes and government expenditures were constant, If taxes and government ex...

If taxes and government expenditures were constant and did not vary with income, then: A. passive deficits would increase. B. structural deficits would increase. C. passive deficit

Separation of growth and fluctuation, Separation of growth and fluctuation ...

Separation of growth and fluctuation It is very useful to separate the evolution of a variable which grows over time into a trend and fluctuations around the trend. The graphs

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd