PRC-2 · Chapter 9 · Question 51 of 60
To properly convert a nominal wage into a 'real' wage (reflecting true inflation-adjusted purchasing power), what mathematical operation is executed?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) The nominal wage is divided by the current Consumer Price Index (CPI) and multiplied by 100.
Explanation
Dividing the raw nominal wage by the prevailing price index mathematically strips away the artificial inflation factor, revealing the true 'real' purchasing power (or deflated value) of the income.
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