If the nominal wage falls by 2 percent and the price level falls by 5 percent, the real wage will
A)be unaffected.
B)fall by 7 percent.
C)rise by 3 percent.
D)rise by 7 percent.

Question

Quizplus · Accepted Answer

The real wage increases because the decrease in the price level (5%) is greater than the decrease in the nominal wage (2%), effectively increasing the purchasing power of the wage by 3%.

If the Nominal Wage Falls by 2 Percent and the Price