Suppose that the nominal wage,the expected and actual price levels,and the expected and actual inflation rates for a hypothetical economy in 2013 are presented in the following table.What is the expected real wage rate in 2013?
A) $28.57
B) $29.73
C) $29.41
D) $28.12

Question

Suppose that the nominal wage,the expected and actual price levels,and the expected and actual inflation rates for a hypothetical economy in 2013 are presented in the following table.What is the expected real wage rate in 2013? 
A) $28.57 
B) $29.73 
C) $29.41 
D) $28.12

Quizplus · Accepted Answer

The formula for calculating the expected real wage rate is:

Expected real wage rate = Nominal wage rate / (1 + Expected inflation rate)

Plugging in the values from the table, we get:

Expected real wage rate = $35 / (1 + 0.18) = $29.41

Therefore, the expected real wage rate in 2013 is $29.41, which is option C.

Suppose That the Nominal Wage,the Expected and Actual Price Levels,and