Consternation Corporation has an agreement with its workers to index completely the wage of its employees using the CPI.Consternation Corporation currently pays its production line workers $7.50 an hour and is scheduled to index their wages today.If the CPI is currently 130 and was 125 a year ago,the firm should increase the hourly wages of its workers by
A)$0.04.
B)$0.29.
C)$0.30.
D)$0.50.

Question

Quizplus · Accepted Answer

The formula to calculate the indexed wage is:

Current Wage x (Current CPI / CPI at the time of the last adjustment)

Using the information provided, we get:

Current Wage = $7.50
Current CPI = 130
CPI at the time of last adjustment = 125

Indexed Wage = $7.50 x (130/125) = $7.80

Therefore, the increase in hourly wages would be:

$7.80 - $7.50 = $0.30

Hence, the correct answer is choice C, $0.30.

Consternation Corporation Has an Agreement with Its Workers to Index