If a price index changed from 150 in 2008 to 148.5 in 2009, while Jim Bob's nominal wage fell from $25 to $24,?
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1.Better off like everyone else in the economy since prices are lower for consumers. 2.Neither better nor worse off, since his real wage remained constant. 3.Better off since his nominal wage fell slower than the price level did. 4.Worse off since his nominal wage fell faster than the price level did.
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Answer:
4 = answer. One way to look at it is how many hours he had to work to buy the price index. 2008: 150 / 25 = 6 hours 2009: 148.5 / 24 = 6.1875 hours More hours for same goods = worse off.
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