Converse, Dr. Pepper, Vans and wheat. (b) Assume that in Queentucky the GDP deflator/CPI index is 100 in the base year and 125 this year. Calculate the following: (i.) The inflation rate, expressed as a percentage, between the base year and this year. 40% (ii.) This year’s real GDP 32,000 (c) A worker is negotiating a raise with her employer. Based on the inflation rate you calculated in (b)(i), if the employee is given a cost-of-living-adjustment (COLA) of 10% to her salary, what will happen to her real wage? Explain. Answer question C?
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OUTPUT AND PRICES IN QUEENTUCKY, ARIZONA
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This Year’s Output |
This Year’s Price |
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800 pairs of Converse |
$10 per pair |
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2,000 gallons of Dr. Pepper |
$2 per gallon |
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200 pairs of Vans |
$15 per pair |
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5,000 lbs. of wheat |
$5 per pound |
Queentucky produces 4 final goods: Converse, Dr. Pepper, Vans and wheat.
(b) Assume that in Queentucky the
(i.) The inflation rate, expressed as a percentage, between the base year and this year.
40%
(ii.) This year’s real GDP
32,000
(c) A worker is negotiating a raise with her employer. Based on the inflation rate you calculated in (b)(i), if the employee is given a cost-of-living-adjustment (COLA) of 10% to her salary, what will happen to her real wage? Explain.
Answer question C?
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