Asked by Yessenia Castro on May 20, 2024
Verified
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.
Purchasing Power
The ability of an individual or entity to buy goods and services, essentially reflecting the amount of goods or services that one unit of currency can buy.
Nominal Wage
The wage measured in dollars of the year in question; the dollar amount on a paycheck.
Disposable Income
The sum of money households can use for expenditure and savings once income taxes are deducted.
- Distinguish the impact of inflation on various economic participants such as borrowers, lenders, and workers.
- Comprehend the function and alteration in monetary worth over periods as a consequence of inflation.
Verified Answer
RC
Ramón CastilloMay 21, 2024
Final Answer :
A
Explanation :
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.
Learning Objectives
- Distinguish the impact of inflation on various economic participants such as borrowers, lenders, and workers.
- Comprehend the function and alteration in monetary worth over periods as a consequence of inflation.