13. Using a Price Index
Finding real wages
Nominal Wage ÷ Price Index
$10 ÷ 2.3103 = $4.33
14. An application to
minimum wages
Federal minimum wage, 1982: $3.35
Federal minimum wage, 2013: $7.25
Real wage = ?
Colorado minimum wage, 2013: $7.78
Real wage = ?
15. An application to
minimum wages
Federal minimum wage, 1982: $3.35
Federal minimum wage, 2013: $7.25
Real wage = $3.14
Colorado minimum wage, 2013: $7.78
Real wage = $3.37
18. Using inflation data
Finding real interest rates
Nominal Rate - Inflation Rate = Real Rate
Example
Interest rate on government debt =
2.04%
Real rate?
19. Using inflation data
Finding real interest rates
Example
Interest rate on government debt =
2.04%
Real rate is 2.04% - 1.8% = 0.24%
29. The “appropriate”
amount of unemployment
Zero cyclical unemployment
Full employment rate of unemployment
VERY roughly 5%
30. Back to Okun’s Law
Economic underperformance?
7.8% - 5% = 2.8% too much unemployment
2.8% x 2 = 5.6% too little output
5.6% x $15.811 trillion = $885 billion
underproduction