Asked by
Camila Arellano
on Nov 11, 2024
Verified
If nominal wage rates increase by 2 percent per year and the price level increases by 5 percent per year,real wages will:
A) increase by 3 percent per year.
B) increase by 5 percent per year.
C) increase by 2 percent per year.
D) decrease by 5 percent per year.
E) decrease by 3 percent per year.
Nominal Wage Rates
The amount of money paid to an employee by an employer in current prices, without adjusting for inflation.
Real Wages
Wages or salaries adjusted for inflation, reflecting the true purchasing power of income.
- Decode the relationship that exists between nominal wages, real wages, and the prevailing price level.
- Comprehend how inflation affects nominal and real wages.
Verified Answer
RD
Learning Objectives
- Decode the relationship that exists between nominal wages, real wages, and the prevailing price level.
- Comprehend how inflation affects nominal and real wages.