Question

50)In 1957 in the US, the nominal minimum wage as $1 and the CPI was 27. In 2019 in the US, suppose that the nominal minimum wage was $13 and the CPI was 250. Based on this information we can conclude that:

Select one:

a. Nominal wage increased and real wage decreased from 1957 to 2019

b. Real and nominal wage in the U.S. increased at the same rate from 1957 to 2019

c. Real and nominal minimum wage in the U.S. from 1957 to 2019 stayed constant

d. Real minimum wage increased at a slower rate than the increase in nominal wage from 1957 to 2019

e. We cannot calculate real and nominal wage based on this information

Answer 1

Q50) Suppose lets take 1957 as the base year

Nominal wage in 1957 = real wage in 1957 = 1

Real wage in 2019 in 1957 prices = Nominal wage in 2019*(CPI in 1957/CPI in 2019)

= 13*(27/250)

= 1.404

Thus, Nominal wage has increased from 1 to 13 and real wage has increased from 1 to 1.404. The nominal wage has clearly increased at a faster rate than real wage

Thus, the answer is (d) Real minimum wage increased at a slower rate than the increase in nominal wage from 1957 to 2019