Asked by Hamish Harries on Jul 29, 2024
Verified
If the nominal wages of carpenters rose by 5 percent in 2013 and the price level increased by 3 percent,then the real wages of carpenters:
A) decreased by 2 percent.
B) increased by 2 percent.
C) increased by 3 percent.
D) increased by 8 percent.
Nominal Wages
The wage earned by workers as expressed in current dollars, without adjustment for inflation, representing the face value of the pay received.
Price Level
The average of current prices across the entire spectrum of goods and services produced in the economy.
Real Wages
The purchasing power of wages, reflecting the quantity of goods and services that can be bought with wages after adjusting for inflation.
- Determine the alterations in genuine wages through analysis of nominal wage shifts and inflationary changes.
Verified Answer
RB
Rebecca BellegardeJul 30, 2024
Final Answer :
B
Explanation :
Real wages are nominal wages adjusted for inflation. In this case, nominal wages rose by 5 percent, but the price level increased by 3 percent, meaning that the cost of living also increased. To find the real wage increase, we subtract the inflation rate from the nominal wage increase: 5% - 3% = 2%. Therefore, the real wages of carpenters increased by 2 percent.
Learning Objectives
- Determine the alterations in genuine wages through analysis of nominal wage shifts and inflationary changes.