If wages grew 6.20 percent, but inflation was 4.30 percent, what was the approximate real increase...

If wages grew 6.20 percent, but inflation was 4.30 percent, what was the approximate real increase in wages? (Enter your answer as a percent rounded to 2 decimal places.)

Expert Solution

The Real rate of return formula is

= {(1+Nominal rate)/(1+Inflation rate)} - 1

Nominal rate = 6.20 %

Inflation rate = 4.30 %

Putting values into the formula

= {(1 + 0.0620)/(1+0.0430)} - 1

= {(1.0620)/(1.0430)} - 1

= 1.01821668 - 1

= 0.01821668

= 1.821668%

= 1.82% (final answer)

jeff jeffy answered 2 years ago

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