In the context of measuring economic well-being, what does the 'real average hourly wage' in 2009 represent?

• A. The average hourly wage converted to US dollars using the 2009 exchange rate.
• B. The average hourly wage before taxes and deductions in 2009.
• C. The average hourly wage paid to workers in the manufacturing sector in 2009.
• D. The average hourly wage adjusted for inflation to reflect purchasing power in 2009.

Answer: (D)

Verified step by step guidance

1. Understand that the 'real average hourly wage' is a measure that adjusts nominal wages to account for changes in the price level (inflation) over time.
2. Recognize that nominal wages are the wages paid in current dollars without adjusting for inflation, which can be misleading when comparing wages across different years.
3. The real wage reflects the purchasing power of the wage, meaning how much goods and services the wage can actually buy in a given year.
4. To calculate the real average hourly wage for 2009, you would take the nominal average hourly wage and adjust it using a price index (such as the Consumer Price Index) to remove the effects of inflation, bringing all wages to 2009 price levels.
5. Therefore, the real average hourly wage in 2009 represents the average hourly wage adjusted for inflation to reflect the true purchasing power of workers in that year.