The Consumer Price Index Is 132 in Year 1 and 125

question 37

Multiple Choice

The consumer price index is 132 in Year 1 and 125 in Year 2. The nominal wage rate is $31 in Year 1 and $30 in Year 2. What is the approximate percentage change in the real wage rate from Year 1 to Year 2?

• A)-5.3 percent
• B)6 percent
• C)-3.2 percent
• D)2.1 percent

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Definitions:

Demand

The desire for certain goods or services backed by the ability and willingness to pay for them.

Luxury Goods

High-end items that are not necessary for survival but are desired for their quality, status, or aesthetics.

Doubled Income

A situation where an individual's or entity's income increases to twice its initial amount.

Homothetic Preferences

Consumer preferences where if a bundle of goods is preferred to another, then any scaled up or down version of the bundle is also preferred based on the proportion of goods, maintaining consumption patterns.