During the time period represented in Figure 7.3,the purchasing power of the average worker
A)Increased because nominal wages increased.
B)Decreased because real income decreased.
C)Stay the same because COLAs reduced purchasing power.
D)Decreased because nominal income decreased.

Question

During the time period represented in Figure 7.3,the purchasing power of the average worker
A)Increased because nominal wages increased. 
B)Decreased because real income decreased. 
C)Stay the same because COLAs reduced purchasing power. 
D)Decreased because nominal income decreased.

Quizplus · Accepted Answer

Figure 7.3 shows that the CPI increased significantly over the time period. If nominal wages remained constant, then real wages would have decreased as the cost of goods and services increased. Therefore, the purchasing power of the average worker decreased because real income decreased.

During the Time Period Represented in Figure 7