1.4 Measuring the macroeconomy: nominal wages, prices, and real wages

nominal wage

the actual amt of money per unit of time i.e. per hour or per year, in a given currency, received in payment for work

why are wage statistics aggregated?

bc wages vary widely by occupation and industry

consumer price index (CPI)

metric that tracks total price of a shopping basket of goods and services commonly purchased by households i.e. food, beverages, utilities, rent, healthcare, education, etc.

**increase in CPI = increase in overall prices in the economy

**constructed using a baseline year and tracking changesin price level

real wage

the wage expressed in terms of the amount of goods and services the worker can buy with it.

real wage index = (nominal wage index / consumer price index) x 100

**when general increase in prices over time > nominal wage increase —> workers will have a lower real wage than the baseline year

**when price level and nominal wage have increased by the same amt after a period of time, real wage is at the same level as the base yr