Suppose the price level rises by 4 percent and the nominal wage rises 6 percent.How is the real wage affected?
A) It falls by 2 percent.
B) It falls by 10 percent.
C) It rises by 2 percent.
D) It rises by 10 percent.

Question

Suppose the price level rises by 4 percent and the nominal wage rises 6 percent.How is the real wage affected?  
A) It falls by 2 percent. 
B) It falls by 10 percent. 
C) It rises by 2 percent. 
D) It rises by 10 percent.

Quizplus · Accepted Answer

The real wage increases because the nominal wage rises by a greater percentage (6%) than the price level (4%), effectively increasing the purchasing power of the wage by 2%.

Suppose the Price Level Rises by 4 Percent and the Nominal