In order to keep the real wage rate constant, the
A) money wage rate must increase when the price level falls.
B) inflation rate must be exactly one half of the expected inflation rate.
C) money wage rate must increase by the same amount as the inflation rate.
D) money wage rate must decrease by the same amount as the inflation rate.
E) nominal interest rate must be equal to the inflation rate.

Question

Quizplus · Accepted Answer

To maintain the real wage rate constant, the money wage rate must increase at the same rate as inflation. This ensures that the purchasing power of the wages remains unchanged despite the increase in prices.

In Order to Keep the Real Wage Rate Constant, the