The nominal wage is $40 an hour and the price level as measured by a price index is 2.00.If the nominal wage falls to $30 and the price index declines to 1.50,according to the worker misperception explanation of the upward-sloping SRAS curve,workers will initially perceive the
A) real wage as something greater than $20.
B) real wage as something less than $20.
C) real wage as $20.
D) nominal wage as something more than $30.
E) nominal wage as something less than $30.

Question

Quizplus · Accepted Answer

According to the worker misperception explanation, workers only consider changes in their nominal wage and may not immediately adjust to changes in the price level. Therefore, with the nominal wage decreasing from $40 to $30 and the price index decreasing from 2.00 to 1.50, workers may initially perceive their real wage as decreasing from $20 to $20/1.5 = $13.33, which is less than $20. Therefore, the best choice is B.

The Nominal Wage Is $40 an Hour and the Price