In order to keep the real wage rate constant, the
A) money wage rate must increase by the same amount as the inflation rate.
B) inflation rate must be exactly one half of the expected inflation rate.
C) nominal interest rate must be equal to the inflation rate.
D) money wage rate must increase when the price level falls.
E) money wage rate must decrease by the same amount as the inflation rate.

Question

Quizplus · Accepted Answer

To keep the real wage rate constant, the money wage rate must increase by the same amount as the inflation rate to offset the rise in prices and maintain purchasing power.

In Order to Keep the Real Wage Rate Constant, the