If the nominal wages of carpenters rose by 3 percent in 2019 and the price level decreased by 4 percent, then the real wages of carpenters
A)decreased by 1 percent.
B)increased by 7 percent.
C)increased by 1 percent.
D)increased by 4 percent.

Question

Quizplus · Accepted Answer

Real wages adjust for inflation or deflation, showing the purchasing power of nominal wages. If nominal wages increase by 3% and the price level decreases by 4%, real wages effectively increase by 7% because carpenters earn more while prices of goods and services fall, enhancing their purchasing power.

If the Nominal Wages of Carpenters Rose by 3 Percent