If the nominal wage rises by 8 percent and the price level falls by 2 percent, the real wage will
A)be unaffected.
B)fall by 6 percent.
C)rise by 10 percent.
D)rise by 6 percent.

Question

Quizplus · Accepted Answer

The real wage increases by 10 percent because the nominal wage increase of 8 percent is combined with a 2 percent decrease in the price level, effectively making the wage increase more valuable by a total of 10 percent.

If the Nominal Wage Rises by 8 Percent and the Price