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6. Real wages, nominal wages, and unexpected changes in the pricelevel No minal /Real Cho's paycheck each week is $12 per hour times the number of hours she works. Cho thus currently earns a Suppose the price of orange juice is $4 per gallon. The amount of orange juice she can buy with her paycheck is which represents her v wage. v wage of $12 per hour. Nomineul l Real I goll on 2 galeon v of orange juice, When workers and firms negotiate compensation packages, they have expectations about the price level (and changes in the price level) and agree on wage with those expectations in mind. If the price level turns out to be higher than expected, a worker's ▼ than both the worker and employer expected when they agreed to the wage. 12 gallon Recd 3 gallon v wage is Suppose that Cho and her employer both expected inflation to be 3% between 2012 and 2013. They signed a two-year contract stipulating that Cho Nominol would earn $12 per hour in 2012 and $12.36 per hour in 2013. However, actual inflation between 2012 and 2013 turned out to be 5% rather than the / Nominal expected 3%. For example, suppose the price of orange juice rose from $4 per gallon to $4.20 per gallon. This means that between 2012 and 2013, heul Cho's nominal wage wigher v by v, and her real wage or v by approximately lower decreased - 2%. -2%. 3%. (ncreased Vס or orease d 37. 8%. deereased

6. Real wages, nominal wages, and unexpected changes in the pricelevel No minal /Real Cho's paycheck each week is $12 per hour times the number of hours she works. Cho thus currently earns a Suppose the price of orange juice is $4 per gallon. The amount of orange juice she can buy with her paycheck is which represents her v wage. v wage of $12 per hour. Nomineul l Real I goll on 2 galeon v of orange juice, When workers and firms negotiate compensation packages, they have expectations about the price level (and changes in the price level) and agree on wage with those expectations in mind. If the price level turns out to be higher than expected, a worker's ▼ than both the worker and employer expected when they agreed to the wage. 12 gallon Recd 3 gallon v wage is Suppose that Cho and her employer both expected inflation to be 3% between 2012 and 2013. They signed a two-year contract stipulating that Cho Nominol would earn $12 per hour in 2012 and $12.36 per hour in 2013. However, actual inflation between 2012 and 2013 turned out to be 5% rather than the / Nominal expected 3%. For example, suppose the price of orange juice rose from $4 per gallon to $4.20 per gallon. This means that between 2012 and 2013, heul Cho's nominal wage wigher v by v, and her real wage or v by approximately lower decreased - 2%. -2%. 3%. (ncreased Vס or orease d 37. 8%. deereased

Principles of Economics (MindTap Course List)
Principles of Economics (MindTap Course List)
8th Edition
ISBN:9781305585126
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter24: Measuring The Cost Of Living
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6. Real wages, nominal wages, and unexpected changes in the pricelevel No minal /Real Cho's paycheck each week is $12 per hour times the number of hours she works. Cho thus currently earns a Suppose the price of orange juice is $4 per gallon. The amount of orange juice she can buy with her paycheck is which represents her 1 gollon v wage. Nominerl / Real v wage of $12 per hour. v of orange juice, When workers and firms negotiate compensation packages, they have expectations about the price level (and changes in the price level) and agree on 2 galeon v wage with those expectations in mind. If the price level turns out to be higher than expected, a worker's v than both the worker and employer expected when they agreed to the wage. uoTS て Recd 3 gallon v wage is Suppose that Cho and her employer both expected inflation to be 3% between 2012 and 2013. They signed a two-year contract stipulating that Cho Nominol would earn $12 per hour in 2012 and $12.36 per hour in 2013. However, actual inflation between 2012 and 2013 turned out to be 5% rather than the Reul /Nominal expected 3%. For example, suppose the price of orange juice rose from $4 per gallon to $4.20 per gallon. This means that between 2012 and 2013, logner Cho's nominal wage v by v, and her real wage or v by approximately lower decreased - 27. -2%. 3%. (ncreased (acrense d or 8%. 37. deerease d
Transcribed Image Text:6. Real wages, nominal wages, and unexpected changes in the pricelevel No minal /Real Cho's paycheck each week is $12 per hour times the number of hours she works. Cho thus currently earns a Suppose the price of orange juice is $4 per gallon. The amount of orange juice she can buy with her paycheck is which represents her 1 gollon v wage. Nominerl / Real v wage of $12 per hour. v of orange juice, When workers and firms negotiate compensation packages, they have expectations about the price level (and changes in the price level) and agree on 2 galeon v wage with those expectations in mind. If the price level turns out to be higher than expected, a worker's v than both the worker and employer expected when they agreed to the wage. uoTS て Recd 3 gallon v wage is Suppose that Cho and her employer both expected inflation to be 3% between 2012 and 2013. They signed a two-year contract stipulating that Cho Nominol would earn $12 per hour in 2012 and $12.36 per hour in 2013. However, actual inflation between 2012 and 2013 turned out to be 5% rather than the Reul /Nominal expected 3%. For example, suppose the price of orange juice rose from $4 per gallon to $4.20 per gallon. This means that between 2012 and 2013, logner Cho's nominal wage v by v, and her real wage or v by approximately lower decreased - 27. -2%. 3%. (ncreased (acrense d or 8%. 37. deerease d
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