Which of these statements is NOT correct?
A) If your nominal wages rise at a rate higher than the inflation rate,you have received a "real" pay raise.
B) If your nominal wages rise at exactly the rate of inflation,your purchasing power over time remains constant.
C) If your nominal wages rise at 4% while inflation rises at 5%,you have essentially received a "pay cut."
D) If deflation occurs,you will receive a "real" pay raise regardless of what happens to your nominal wage.

Question

Quizplus · Accepted Answer

If deflation occurs, prices of goods and services decrease, which means that the purchasing power of your wages goes up even if your nominal wage stays the same. Therefore, option D is incorrect as it implies that a real pay raise only happens when nominal wages increase.

Which of These Statements Is NOT Correct