Suppose you recently took a pay cut of 2% at your job.You expect the price level to fall by 3% during this year.What would be the impact on your real wage?
A) The real wage would fall by 3%
B) The real wage would rise by 3%
C) The real wage would fall by 1%
D) The real wage would rise by 1%
E) The real wage would be unchanged

Question

Quizplus · Accepted Answer

A 2% pay cut combined with a 3% decrease in the price level results in a net increase in real wage by 1%, as the purchasing power of your income increases.

Suppose You Recently Took a Pay Cut of 2% at Your