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An economy's nominal wage index increased from 100 to 120 over a five-year period, while its price level index rose from 100 to 125 during the same time. This means the average worker's ability to purchase goods and services has increased.
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Analyzing Economic Trends with Indexed Data
The following table presents index numbers for average nominal wages and the overall price level for a small economy, using Year 1 as the base year.
Year Nominal Wage Index Price Level Index 1 100 100 2 105 102 3 108 110 Based on this data, which statement accurately describes the trend in the purchasing power of an average worker's earnings?
Calculating and Interpreting an Economic Index
An economic analyst is tracking the relationship between earnings and the cost of living. For each scenario below, which describes the change in an earnings index and a price index from a common base year value of 100, match it to the correct outcome for the purchasing power of those earnings.
An economy's nominal wage index increased from 100 to 120 over a five-year period, while its price level index rose from 100 to 125 during the same time. This means the average worker's ability to purchase goods and services has increased.