Suppose workers agreed to a contract that guaranteed a real wage increase of 3 percent per year.If the inflation rate was 7 percent over the following year,what is the required increase in the nominal wage to meet the contract requirements?
A) 10 percent
B) 3 percent
C) 4 percent
D) 7 percent
E) 1 percent

Question

Quizplus · Accepted Answer

To achieve a real wage increase of 3% with an inflation rate of 7%, the nominal wage must increase by 10% (7% inflation + 3% real increase).

Suppose Workers Agreed to a Contract That Guaranteed a Real