PRC-2 · Chapter 9 · Question 29 of 60
When converting a nominal wage into a real wage, what mathematical role does the price index play?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) It is used as the divisor to mathematically strip away the effects of inflation.
Explanation
To find true real purchasing power, the nominal wage is divided by the current price index and multiplied by 100, effectively stripping away the artificial effects of inflation.
More Indices MCQs
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