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16 September, 10:43

Consternation Corporation has an agreement with its workers to index completely the wage of its employees using the CPI. Consternation Corporation currently pays its production line workers $8.00 an hour and is scheduled to index their wages today. If the CPI is currently 160 and was 128 a year ago, the firm should increase the hourly wages of its workers bya.$0.25. b.$2.56. c.$1.60. d.$2.00.

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  1. 16 September, 10:47
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    Option (d) is correct.

    Explanation:

    Given that,

    Current wage rate of the workers = $8 per hour

    Current year CPI = 160

    Previous year CPI = 128

    Inflation rate:

    = (Current year CPI - Previous year CPI) : Previous year CPI

    = (160 - 128) : 128

    = 32 : 128

    = 0.25 or 25%

    Therefore, the firm should increase the hourly wages of its workers by:

    = Inflation rate * Current wage rate of the workers

    = 25% * $8 per hour

    = $2 per hour
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