A decrease in a person's real wage necessarily means:
A)lower purchasing power.
B)a lower nominal wage.
C)a lower personal disposable income.
D)a higher nominal wage.
E)a higher personal disposable income.

Question

Quizplus · Accepted Answer

A decrease in real wage means that the wage has not kept up with inflation, so the person's purchasing power has decreased, even if their nominal wage (the amount on their paycheck) has stayed the same or even increased slightly. A lower nominal wage (B) or personal disposable income (C) may or may not be a result of a decreased real wage, depending on other factors such as changes in taxes or benefits. A higher nominal wage (D) or personal disposable income (E) are not possible outcomes of a decreased real wage.

A Decrease in a Person's Real Wage Necessarily Means