In which of the following situations would a worker have the greatest real income?
A) She receives a pay cut and her nominal wage falls by 5 percent,while the CPI falls by 20 percent.
B) She receives a pay cut and her nominal wage falls by 5 percent,while the CPI increases by 10 percent.
C) Her nominal wage remains the same,as does the CPI.
D) She receives a raise and her nominal wage increases by 5 percent,while the CPI increases by 10 percent.
E) She receives a raise and her salary increases by 5 percent,while the CPI falls by 5 percent.

Question

Quizplus · Accepted Answer

When the nominal wage falls by 5% but the CPI falls by 20%, the real income increases because the cost of living decreases more than the wage decrease.

In Which of the Following Situations Would a Worker Have