CIMA BA1 · Chapter 10 · Question 6 of 10
An employee's weekly wage was $400 in Year 1 and $460 in Year 3. A retail price index was 100 in Year 1 and 112 in Year 3. What is the Year 3 wage expressed in Year 1 prices (to the nearest cent)?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) $410.71
Explanation
Real wage = money wage x (base index / current index) = 460 x 100 / 112 = $410.71. In real terms the wage has risen by 2.68%, much less than the 15% money increase. $448.00 is the Year 1 wage restated in Year 3 prices.
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