If the nominal wages of carpenters rose by 1 percent in 2019 and the price level increased by 4 percent, then the real wages of carpenters
A)decreased by 4 percent.
B)decreased by 3 percent.
C)increased by 3 percent.
D)increased by 5 percent.

Question

Quizplus · Accepted Answer

Real wages adjust for inflation, showing the purchasing power of earnings. If nominal wages increased by 1% but prices went up by 4%, real wages effectively decreased by 3% because the increase in wages does not keep pace with the increase in prices, reducing purchasing power.

If the Nominal Wages of Carpenters Rose by 1 Percent