What is the primary source of higher real wages?
A) labor unions
B) the threat of a strike by a union
C) increases in productivity
D) increases in the supply of money

Question

Quizplus · Accepted Answer

Increases in productivity lead to an increase in output per worker, which in turn leads to an increase in real wages (the purchasing power of wages). This is because a more productive worker can produce more goods or services in the same amount of time, which allows for higher wages to be paid without driving up prices. Labor unions and strikes may have some ability to negotiate higher wages, but their power is limited and may sometimes lead to unemployment if employers are unable to pay the wages demanded. Increases in the supply of money may lead to inflation, which can temporarily increase nominal wages but ultimately erodes the purchasing power of those wages.

What Is the Primary Source of Higher Real Wages