If prices (as measured by the CPI)fell by one-half and nominal wages fell by one-third,what would happen to real wages?
A) They would fall by one-third
B) They would remain unchanged
C) They would decrease
D) They would increase
E) They would fall by one-half

Question

Quizplus · Accepted Answer

Real wages are calculated by dividing nominal wages by the price level (CPI). If prices fell by one-half and nominal wages fell by one-third, the price level would decrease more than the decrease in nominal wages, resulting in an increase in real wages.

If Prices (As Measured by the CPI)fell by One-Half and Nominal