Asked by Jalon Williams on May 13, 2024
Verified
Identify the correct statement.
A) In periods of low inflation,real wages are constant but nominal wages decline.
B) If the price level increases,real wages will increase.
C) If the price level increases,nominal wages will fall.
D) In periods of high inflation,real wages change even if nominal wages remain constant.
E) If the inflation rate is high,real wages and nominal wages change by the same amount.
Nominal Wages
Wages paid to employees that have not been adjusted for inflation, representing the amount of money earned in current dollars.
Inflation Rate
The rate at which the overall price level of goods and services increases, thereby reducing the buying power.
- Understand the relationship between nominal wages, real wages, and the price level.
Verified Answer
HM
Hamza MallickMay 19, 2024
Final Answer :
D
Explanation :
In periods of high inflation, the prices of goods and services increase, which leads to a decrease in the purchasing power of money. If nominal wages remain constant, the real value of wages decreases, leading to a change in real wages even if nominal wages remain the same. Therefore, statement D is the correct one.
Learning Objectives
- Understand the relationship between nominal wages, real wages, and the price level.