If prices increase by 4 percent and wages increase by 8 percent, the:
A) nominal wage has not changed.
B) real wage has increased.
C) real wage has not changed.
D) nominal wage has increased by 4 percent.

Question

Quizplus · Accepted Answer

When prices increase by 4 percent and wages increase by 8 percent, the real wage has increased because it has grown faster than the rate of inflation. In other words, workers can now afford more goods and services with their increased wages, even though prices have also gone up.

If Prices Increase by 4 Percent and Wages Increase by 8