In Las Vegas, the cost of living index is 110, and in San Francisco, it is 170. You work in Las Vegas currently and your salary is $57,000. You are offered a promotion and pay raise of $70,000 to move to San Francisco. If you take the promotion:
your nominal wage increased but your real wage has decreased.
both your nominal and real wage have decreased.
your nominal wage decreased but your real wage has increased.
your nominal wage and your real wage have increased.
your real wage remained constant even though your nominal wage rose
Solution
In Las Vegas, the cost of living index is 110, and in San Francisco, it is 170. You work in Las Vegas currently and your salary is $57,000. You are offered a promotion and pay raise of $70,000 to move to San Francisco. If you take the promotion: A = your nominal wage increased but your real wage has decreased.
Explanation: In Las Vegas the cost of living index is 110 and salary is $57,000. In San Francisco the cost of living index is 170 hence salary must be = [170 / 110] * $57,000 = $88,090.91 so that we are indifferent between the two salaries. But after moving to San Francisco a salary of $70,000 is paid hence our nominal salary has increased but the real salary has decreased considering the higher cost of living in San Francicso.
I hope my solution solves your query.
Regards.
.
In Las Vegas- the cost of living index is 110- and in San Francisco- i.docx
1. In Las Vegas, the cost of living index is 110, and in San Francisco, it is 170. You work in Las
Vegas currently and your salary is $57,000. You are offered a promotion and pay raise of
$70,000 to move to San Francisco. If you take the promotion:
your nominal wage increased but your real wage has decreased.
both your nominal and real wage have decreased.
your nominal wage decreased but your real wage has increased.
your nominal wage and your real wage have increased.
your real wage remained constant even though your nominal wage rose
a. your nominal wage increased but your real wage has decreased.
b. both your nominal and real wage have decreased.
c. your nominal wage decreased but your real wage has increased.
d. your nominal wage and your real wage have increased.
e. your real wage remained constant even though your nominal wage rose
Solution
In Las Vegas, the cost of living index is 110, and in San Francisco, it is 170. You work in Las
Vegas currently and your salary is $57,000. You are offered a promotion and pay raise of
$70,000 to move to San Francisco. If you take the promotion: A = your nominal wage
increased but your real wage has decreased.
Explanation: In Las Vegas the cost of living index is 110 and salary is $57,000. In San Francisco
the cost of living index is 170 hence salary must be = [170 / 110] * $57,000 = $88,090.91 so that
we are indifferent between the two salaries. But after moving to San Francisco a salary of
$70,000 is paid hence our nominal salary has increased but the real salary has decreased
considering the higher cost of living in San Francicso.
I hope my solution solves your query.
![In Las Vegas, the cost of living index is 110, and in San Francisco, it is 170. You work in Las
Vegas currently and your salary is $57,000. You are offered a promotion and pay raise of
$70,000 to move to San Francisco. If you take the promotion:
your nominal wage increased but your real wage has decreased.
both your nominal and real wage have decreased.
your nominal wage decreased but your real wage has increased.
your nominal wage and your real wage have increased.
your real wage remained constant even though your nominal wage rose
a. your nominal wage increased but your real wage has decreased.
b. both your nominal and real wage have decreased.
c. your nominal wage decreased but your real wage has increased.
d. your nominal wage and your real wage have increased.
e. your real wage remained constant even though your nominal wage rose
Solution
In Las Vegas, the cost of living index is 110, and in San Francisco, it is 170. You work in Las
Vegas currently and your salary is $57,000. You are offered a promotion and pay raise of
$70,000 to move to San Francisco. If you take the promotion: A = your nominal wage
increased but your real wage has decreased.
Explanation: In Las Vegas the cost of living index is 110 and salary is $57,000. In San Francisco
the cost of living index is 170 hence salary must be = [170 / 110] * $57,000 = $88,090.91 so that
we are indifferent between the two salaries. But after moving to San Francisco a salary of
$70,000 is paid hence our nominal salary has increased but the real salary has decreased
considering the higher cost of living in San Francicso.
I hope my solution solves your query.](https://image.slidesharecdn.com/inlasvegas-thecostoflivingindexis110-andinsanfrancisco-i-230209005156-7cc49d36/85/In-Las-Vegas-the-cost-of-living-index-is-110-and-in-San-Francisco-i-docx-1-320.jpg)
