Asked by Kolby Finnie on May 02, 2024
Verified
If the nominal wages of carpenters rose by 5 percent in 2019 and the price level decreased by 3 percent, then the real wages of carpenters
A) decreased by 2 percent.
B) increased by 8 percent.
C) increased by 2 percent.
D) increased by 5 percent.
Nominal Wages
The amount of money paid to employees before adjustments for inflation, representing the face value of wages at the time they are paid.
Price Level
A measure of the average prices of goods and services in an economy at a given point in time.
Real Wages
Income from work adjusted for the inflation rate, indicating the true buying power of the earnings.
- Identify the effects of changes in the price level on real wages.
Verified Answer
RB
Riley BruceMay 07, 2024
Final Answer :
B
Explanation :
Real wages adjust for inflation, showing the purchasing power of earnings. A 5% nominal wage increase combined with a 3% decrease in the price level effectively boosts real wages by 8%, as workers can buy more with their earnings.
Learning Objectives
- Identify the effects of changes in the price level on real wages.