Burger King is paying $9 an hour to its workers. If the expected inflation rate equals the actual
Inflation rate and both are 10 percent a year, then to keep the real wage rate constant in a year the
Money wage rate must
A)rise to $10.00 an hour.
B)fall to $8.10 an hour.
C)rise to $9.45 an hour.
D)stay at $9.00 an hour.
E)rise to $9.90 an hour.

Question

Quizplus · Accepted Answer

To keep the real wage rate constant with a 10% inflation rate, the money wage rate must also increase by 10%. Therefore, $9.00 + 10% of $9.00 = $9.90 an hour.

Burger King Is Paying $9 an Hour to Its Workers