Workers in country A receive an increase in wages of 10 percent at the same time the inflation rate in country A is 8 percent.Workers in country B receive an increase in wages of 3 percent and the inflation rate in country B is 1 percent.In which country are workers better off?
A)Country A because their real wages rise by 18 percent.
B)Country A because their real wages rise by 10 percent.
C)Country B because the inflation rate is lower.
D)Neither country because the increase in real wages is the same.

Question

Quizplus · Accepted Answer

In both countries, the real wage increase is 2 percent (10% - 8% in country A and 3% - 1% in country B).

Workers in Country a Receive an Increase in Wages of 10