Given the wage in dollar per day and the CPI for years 1 and 2 how do you calculate the nominal % increase in wage and the real % increase in wage?
I am not sure what to do for this or what the formula is if any. Thank you for your help. I have tried to find websites that have info on this but I cannot find a good website.
To calculate the nominal percentage increase in wage, you need the wage in both years 1 and 2. The formula is as follows:
Nominal % increase in wage = (Wage in year 2 - Wage in year 1) / Wage in year 1 * 100
For example, if the wage in year 1 is $50 per day and the wage in year 2 is $60 per day, you would calculate the nominal % increase as:
(60 - 50) / 50 * 100 = 20%
Next, to calculate the real percentage increase in wage, you need the Consumer Price Index (CPI) for years 1 and 2. The CPI measures the average change in prices of a basket of goods and services over time, indicating the rate of inflation.
The formula for calculating the real % increase in wage is as follows:
Real % increase in wage = (Nominal % increase in wage - CPI % increase) / (1 + CPI % increase) * 100
To find the CPI % increase, use the following formula:
CPI % increase = (CPI in year 2 - CPI in year 1) / CPI in year 1 * 100
Let's say the CPI in year 1 is 150 and the CPI in year 2 is 160. The CPI % increase would be:
(160 - 150) / 150 * 100 = 6.67%
Now you can calculate the real % increase in wage using the nominal % increase in wage and the CPI % increase:
(20 - 6.67) / (1 + 6.67) * 100 ≈ 13.10%
Therefore, the real % increase in wage would be approximately 13.10%.
I hope this helps!