CH 6.4 - Macroeconomics CH 6.4 $3.40anhour.ByAugust...

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Macroeconomics CH 6.4 In 1970 the average production worker in the United States was paid $3.40 an hour. By August  2008, the average hourly earnings for such a worker had risen to $18.05 an hour. Three cheers for  economic progress! But wait. American workers were paid much more in 2008, but they also faced a much higher cost of  living. In 1970, a dozen eggs cost only about $0.58; by August 2008, that was up to $1.85. The price  of a loaf of white bread went from about $0.20 to $1.38. And the price of a gallon of gasoline rose  from just $0.33 to $3.84.  Figure       6.7      compares the percentage increase in hourly earnings between  1970 and August 2008 with the increases in the prices of some standard items: the average worker’s  paycheck went further in terms of some goods, but less far in terms of others. Overall, the rise in the  cost of living wiped out many, if not all, of the wage gains of the typical worker from 1970 to 2008. In  other words, once inflation is taken into account, A rising overall level of prices is inflation . A falling overall level of prices is deflation . the living standard of the typical U.S. worker has stagnated from 1970 to the present. The point is that between 1970 and 2008 the economy experienced substantial  inflation : a rise in  the overall level of prices. Understanding the causes of inflation and its opposite, 
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