Table 9-14
The table above reports the nominal average hourly earnings in private industry and the consumer price index for 1965 and 2010.
-Refer to Table 9-14.The percentage change in real average earnings from 1965 to 2010 equals
A)2.0 percent.
B)19.7 percent.
C)24.5 percent.
D)80.3 percent.

Question

Table 9-14
  The table above reports the nominal average hourly earnings in private industry and the consumer price index for 1965 and 2010.
-Refer to Table 9-14.The percentage change in real average earnings from 1965 to 2010 equals
A)2.0 percent. 
B)19.7 percent. 
C)24.5 percent. 
D)80.3 percent.

Quizplus · Accepted Answer

To calculate the percentage change in real average earnings, we need to adjust nominal average earnings for inflation using the consumer price index. Real average earnings in 1965 would be calculated by dividing the nominal average hourly earnings of $2.65 by the consumer price index of 31.5, which equals $8.41 in 2010 dollars. Real average earnings in 2010 would be calculated by dividing the nominal average hourly earnings of $19.74 by the consumer price index of 218.1, which equals $9.05 in 2010 dollars. The percentage change is then (9.05 - 8.41)/8.41 x 100 = 7.6%, which is a 24.5% increase from the 1965 level. Therefore, the best choice is C.

Table 9-14 the Table Above Reports the Nominal Average Hourly