In the long run, real wages are held constant through nominal wage increases being kept in line with inﬂation.

Question

Quizplus · Accepted Answer

Real wages are adjusted for inflation, so in order for them to remain constant, nominal wage increases must also keep pace with inflation. This means that if prices are rising by, say, 2% per year, wages must also increase by 2% in order to maintain the same purchasing power.

In the Long Run, Real Wages Are Held Constant Through