Suppose you received a 5 percent increase in your nominal wage. Over the year, inflation ran about 2 percent. Which of the following is true ?
A) Your real wage increased.
B) Your nominal wage decreased.
C) Both your nominal and real wages decreased.
D) Although your nominal wage rose, your real wage decreased.

Question

Quizplus · Accepted Answer

Your real wage increased because the increase in your nominal wage (5 percent) is greater than the rate of inflation (2 percent), meaning your purchasing power has increased.

Suppose You Received a 5 Percent Increase in Your Nominal