Which of these statements is correct? I. If your nominal wages rise at a rate higher than the inflation rate, you have received a "real" pay raise. II. If your nominal wages rise at exactly the rate of inflation, your purchasing power over time remains constant. III. If your nominal wages rise at 4 percent while inflation rises at 5 percent, you have essentially received a "pay cut."
A) I and II only
B) I and III only
C) II and III only
D) I, II, and III

Question

Quizplus · Accepted Answer

If nominal wages rise higher than inflation, purchasing power increases (I). If wages rise at the same rate as inflation, purchasing power remains constant (II). If wages rise slower than inflation, purchasing power decreases, effectively a "pay cut" (III).

Which of These Statements Is Correct? I