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.

Question

Snickerdoodle

Business

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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Answers (1)

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Karen Brooks · Answer 1

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