Asked by Jacob Corpening on Jun 27, 2024
Verified
Which of the following is true?
A) The nominal wage will be constant only if the inflation rate is constant.
B) The real wage will be greater than the nominal wage only if the inflation rate is constant.
C) The nominal wage and the real wage will change by the same amount if the price level is constant.
D) The real wage will be equal to one only if the price level is zero.
E) The real wage will be constant only if the nominal wage is constant.
Nominal Wage
The wage paid to employees in current currency terms, without adjustment for inflation, representing the face value of earnings.
Real Wage
The purchasing power of wages, adjusted for inflation, reflecting the actual goods and services that can be bought.
Inflation Rate
The measure of inflation through the rising cost of goods and services, which diminishes the power of currency.
- Attain insight into the linkage between nominal wages, real wages, and overall price levels.
Verified Answer
RM
Roman MiksaJun 30, 2024
Final Answer :
C
Explanation :
If the price level is constant, then the nominal wage and the real wage will change by the same amount. This is because the real wage is calculated by dividing the nominal wage by the price level, so if the price level is constant, then any change in the nominal wage will result in an equal change in the real wage. None of the other statements are true.
Learning Objectives
- Attain insight into the linkage between nominal wages, real wages, and overall price levels.