(4) \( \$ 600,000 \). Question 25 Between 1991 and 2008 , the federal minimum wage increased from \( \$ 4.25 \) per hour to \( \$ 6.55 \) per hour, while the CPI increased from 136.2 to 215.3 . We can conclude from this that (1) the minimum wage increased in nominal and in real terms. (2) over the period. (3) the minimum wage increased in nominal terms but decreased in real terms. 4) the minimum wage decreased in nominal terms but increased in real terms. (4) needed to determine what happened to the real minimum wage (4) (4) (4)

To determine how the federal minimum wage changed in **real terms** (i.e., adjusted for inflation) between 1991 and 2008, let's analyze the provided data: - **Nominal Minimum Wage:** - **1991:** \$4.25 per hour - **2008:** \$6.55 per hour - **Consumer Price Index (CPI):** - **1991:** 136.2 - **2008:** 215.3 ### Step 1: Calculate the Inflation Factor To adjust the 1991 wage to 2008 dollars: \[ \text{Inflation Factor} = \frac{\text{CPI in 2008}}{\text{CPI in 1991}} = \frac{215.3}{136.2} \approx 1.581 \] ### Step 2: Adjust the 1991 Wage to 2008 Dollars \[ \text{1991 Wage in 2008 Dollars} = \$4.25 \times 1.581 \approx \$6.722 \] ### Step 3: Compare with the 2008 Nominal Wage - **Adjusted 1991 Wage:** \$6.722 - **Actual 2008 Wage:** \$6.55 ### Conclusion: - **Nominal Terms:** The minimum wage **increased** from \$4.25 to \$6.55. - **Real Terms:** When adjusted for inflation, the 2008 minimum wage (\$6.55) is **less** than what the 1991 wage would be worth in 2008 dollars (\$6.722). This indicates a **decrease** in real terms. ### Correct Answer: **(3) The minimum wage increased in nominal terms but decreased in real terms.** **Why Option (4) Is Not Correct:** Option (4) suggests that more information is needed to determine the real minimum wage change. However, with the given CPI and wage data, we can conclusively determine the real change, making option (3) the accurate choice.