Here are the questions: 1. What is the real entry level wage for college graduat

Question

Here are the questions: 1. What is the real entry level wage for college graduates in 1997? 2. what was the nominal entry level wage in 1990?

The next 2 questions refer to problem 3 in Chapter 6 (7h editioapter (6h What was the real entry-level wage for college graduates in 1997? or 5h edition). al S5.58 S6.55 $7.50 $7.77 $8.50 $9.24 $10.44 $11.49 $12.08 $12.56 $13.65 $14.74 S21.91 20. What was the nominal entry-level wage in 1990? S5.58 S6.55 $7.50 $7.77 $8.50 $9.24 $10.44 $11.49 $12.08 $12.56 $13.65 $14.74 $21.91 3. Refer to the CPI data given in Problem 2. A report found that the real entry- level wage for college graduates declined by 8 percent between 1990 and 1997, T he nominal entry-level wage in 1997 was $13.65 per hour. (LO2) a. What was the real entry-level wage in 1997? . What was the real entry-level wage in 1990? c. What was the nominal entry-level wage in 19902 income is able to buy? 2. Here are values of the CPI (multiplied by 100) for each year from 19 2000. For each year beginning with 1991, calculate the rate of inflation f the previous year. What happened to inflation rates over the 1990s? (LO1) 0n 990 1991 1992 993 1994 1995 1996 1997 1998 1999 2000 130.7 136.2 140.3 44.5 148.2 152.4 156.9 60.5 163.0 66.6 172.2

Explanation / Answer

(1)

Real entry level wage in 1997 ($) = (Nominal wage in 1997 / CPI in 1997) x 100 = (13.65/160.5) x 100

= 8.50

(2)

Real entry level wage in 1997 ($) = Real entry level wage in 1990 x (1 - 0.08)

$8.5 = Real entry level wage in 1990 x 0.92

Real entry level wage in 1990 = $8.5/0.92 = $9.24

Nominal entry level wage in 1990 = (Real entry level wage in 1990 x CPI in 1990) / 100

= ($9.24 x 130.7) / 100 = $12.08

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