Asked by Tristen Adams on Apr 24, 2024
Verified
If the nominal wage falls by 2 percent and the price level falls by 5 percent, the real wage will
A) be unaffected.
B) fall by 7 percent.
C) rise by 3 percent.
D) rise by 7 percent.
Nominal Wage
The wage paid to workers measured in current money terms, without adjusting for inflation, reflecting the actual amount received.
Price Level
The overall average price of the complete range of goods and services available in the economy.
Real Wage
The wage of an individual or group after adjusting for inflation, representing the purchasing power of those wages.
- Analyze how alterations in the price level affect real earnings.
Verified Answer
IM
ingria mcdowell5 days ago
Final Answer :
C
Explanation :
The real wage increases because the decrease in the price level (5%) is greater than the decrease in the nominal wage (2%), effectively increasing the purchasing power of the wage by 3%.
Learning Objectives
- Analyze how alterations in the price level affect real earnings.