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Calculation of real and nominal wages, changes on real and nominal wages, comparison of wages at different years and decision making on employment options.

Pam, having recently graduated from college, is looking to work for 2 years before she enters graduate school. She has received 2 job offers with the following salary structures:

JOB A: Pays $30,000 in 2003 and $40,000 in 2004

JOB B: Pays $30,000 in 2003 and 2004's salary will be equal to $30,000 plus a cost of living adjustment equal to the inflation rate.

Assume the increase in the price level (i.e. the inflation rate) is 35% from 2003 to 2004.

Assume Pam has no preference for either job, other than the highest salary.

Illustrate what is the percentage increase in nominal salary from 2003 to 2004 for JOB A?


Business Economics, Economics

  • Category:- Business Economics
  • Reference No.:- M919792

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