PRC-2 · Chapter 9 · Question 8 of 60
If a worker's nominal monthly salary increases from Rs. 50,000 to Rs. 60,000, but the relevant price index rises from 100 to 125, what has happened to their 'Real Wage'?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) It has decreased to Rs. 48,000.
Explanation
Real wage is calculated by dividing the nominal wage by the price index. Real Wage = (60,000 / 125) * 100 = 48,000. Despite the nominal increase, the worker's true purchasing power has fallen compared to the base year.
More Indices MCQs
- Q10Which specific statistical index tracks the cost of a fixed basket of goods and services typically purchased by an average household?
- Q11In standard index construction, why do economists occasionally perform a process known as 'base shifting'?
- Q12What does a Quantity Index measure?
- Q13If the Laspeyres index for a dataset is 120 and the Paasche index is 125, what is the approximate Fisher's Ideal Index?
- Q14A fundamental characteristic of the Laspeyres Index is that it tends to: