Asked by Marisa Mckay on May 02, 2024
Verified
If the nominal wages of carpenters rose by 1 percent in 2019 and the price level increased by 4 percent, then the real wages of carpenters
A) decreased by 4 percent.
B) decreased by 3 percent.
C) increased by 3 percent.
D) increased by 5 percent.
Nominal Wages
Wages that are paid to workers in current dollars, without adjustment for inflation.
Price Level
A measure of the average of current prices across the entire spectrum of goods and services produced in the economy.
Real Wages
Wages adjusted for inflation, representing the purchasing power of the income received by workers for their labor.
- Study the effects of alterations in nominal and real wages on laborers' power to buy.
Verified Answer
MH
Mahdi HasanMay 09, 2024
Final Answer :
B
Explanation :
Real wages adjust for inflation, showing the purchasing power of earnings. If nominal wages increased by 1% but prices went up by 4%, real wages effectively decreased by 3% because the increase in wages does not keep pace with the increase in prices, reducing purchasing power.
Learning Objectives
- Study the effects of alterations in nominal and real wages on laborers' power to buy.