If the overall price level in the economy increases by 10% and the workers in the economy are able to afford the same amount of goods as before the price change, then which of the following statements is true?
A) The nominal wage of workers has decreased by 10%.
B) The real wage of workers has increased by 10%.
C) The nominal wage of workers has remained constant.
D) The real wage of workers has remained constant.

Question

Quizplus · Accepted Answer

The real wage has remained constant because workers can afford the same amount of goods despite the increase in the overall price level. This implies that any increase in nominal wages has offset the effect of inflation, maintaining the purchasing power of workers.

If the Overall Price Level in the Economy Increases by 10