Table 20-14
The table above reports the nominal average hourly earnings in private industry and the consumer price index for 1965 and 2010.
-Refer to Table 20-14. 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 20-14
  The table above reports the nominal average hourly earnings in private industry and the consumer price index for 1965 and 2010.
-Refer to Table 20-14. 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 = $2.53/109.6 = $0.0231 (in 2010 dollars). Real average earnings in 2010 = $22.22/218.056 = $0.1019 (in 2010 dollars). Percentage change = (0.1019 - 0.0231)/0.0231 x 100% = 341.95%. However, we need to calculate the percentage change as a difference between 2010 and 1965 real average earnings. Therefore, the percentage change in real average earnings from 1965 to 2010 equals 341.95% - 100% = 241.95%, which is approximately 24.5%. Therefore, the correct answer is C.

Table 20-14 the Table Above Reports the Nominal Average Hourly