You get a wage increase from $15 per hour to $17 per hour at your landscaping job. How does this change your nominal and real wages?
A) This increase in pay makes your nominal wage increase. If your nominal wage rose by a greater percentage than the price level, then your real wage also increased.
B) This increase in pay makes your nominal wage increase. If your nominal wage rose by a greater percentage than the price level, then your real wage decreased.
C) This increase in pay makes your real wage increase. If your real wage rose by a greater percentage than the price level, then your nominal wage also increased.
D) This increase in pay makes your real wage decrease. If your real wage rose by a greater percentage than the price level, then your nominal wage decreased.

Question

Quizplus · Accepted Answer

The increase in pay results in an increase in nominal wages. To determine the change in real wages, we need to compare the increase in nominal wages with the increase in the price level. If the nominal wage rose by a greater percentage than the price level, then the real wage also increased. In this case, the 13.3% increase in nominal wages ($2 increase from $15 to $17 per hour) is greater than the average inflation rate of 1.8% in the US, which means that the real wage also increased.

You Get a Wage Increase from $15 Per Hour to $17