If the price level increases by 5 percent and the nominal wage increases by 3.5 percent,the real wage will decrease by 1.5 percent.

Question

Quizplus · Accepted Answer

The real wage is calculated by adjusting the nominal wage for inflation. If the price level increases by 5% and the nominal wage increases by 3.5%, the real wage decreases by 1.5% because the increase in nominal wage is less than the increase in price level.

If the Price Level Increases by 5 Percent and the Nominal