The real wage is measured by
A)the difference between the nominal wage rate and the inflation rate.
B)the difference between the nominal wage rate the interest rate.
C)the ratio of nominal wage and price level.
D)the wage rate divided by the inflation rate.

Question

Quizplus · Accepted Answer

The real wage is measured by the ratio of nominal wage and price level, as it takes into account the impact of inflation on purchasing power. A nominal wage rate may increase, but if prices also increase at the same rate, then the real wage has not actually increased. Therefore, the real wage is a better measure of the actual purchasing power of a worker's income. The other choices are incorrect because they do not take into account the impact of inflation on the wage rate or purchasing power.

The Real Wage Is Measured by