Suppose workers notice a fall in their nominal wage but are slow to notice that the price of things they consume have fallen by the same percentage. They may infer that the reward to working is temporarily
A)low and so supply a smaller quantity of labor.
B)low and so supply a larger quantity of labor.
C)high and so supply a smaller quantity of labor.
D)high and so supply a larger quantity of labor.

Question

Quizplus · Accepted Answer

If workers see their nominal wages fall but do not immediately realize that prices have also fallen, they may perceive their real income (or the reward for working) as being lower than it actually is. This perception might lead them to supply a smaller quantity of labor, thinking they are getting less value for their work.

Suppose Workers Notice a Fall in Their Nominal Wage but Are