Simone and her employer both expected inflation to be 3% between 2012 and 2013, so they agreed, in a two-year contract, that she would earn $12.00 per hour in 2012 and $12.36 per hour in 2013. However, suppose inflation between 2012 and 2013 actually turned out to be 6%, not 3%. For example, suppose the price of orange juice rose from $2.40 per gallon to $2.54 per gallon. This means that between 2012 and 2013, Simone's nominal wage decreased by 3%, and her real wage decreased by approximately

Simone and her employer both expected inflation to be 3% between 2012 and 2013, so they agreed, in a two-year contract, that she would earn $12.00 per hour in 2012 and $12.36 per hour in 2013. However, suppose inflation between 2012 and 2013 actually turned out to be 6%, not 3%. For example, suppose the price of orange juice rose from $2.40 per gallon to $2.54 per gallon. This means that between 2012 and 2013, Simone's nominal wage decreased by 3%, and her real wage decreased by approximately

Economics:

10th Edition

ISBN:9781285859460

Author:BOYES, William

Publisher:BOYES, William

Chapter7: Unemployment And Inflation

Section: Chapter Questions

Problem 7E

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