Real wages represent the difference between wage increases and CPI increases.

Question

Quizplus · Accepted Answer

Real wages are calculated by taking nominal wages (wages in current dollars) and adjusting them for inflation. This is done by dividing the nominal wages by the consumer price index (CPI). The resulting number represents the purchasing power of the wages. If nominal wages increase more than the CPI, then real wages increase. If the opposite happens, real wages decrease. Therefore, real wages represent the difference between wage increases and CPI increases.

Real Wages Represent the Difference Between Wage Increases and CPI