If the nominal wage of workers increases by 10% and the real wage of workers remains unchanged, then the overall price level must have:
A) increased by 10%.
B) decreased by 10%.
C) increased by more than 10%.
D) decreased by less than 10%.

Question

Quizplus · Accepted Answer

If the nominal wage increases by 10% and the real wage remains unchanged, it means that the purchasing power of the wage has not changed. This can only happen if the overall price level also increases by the same percentage, 10%, to offset the nominal wage increase, keeping the real wage constant.

If the Nominal Wage of Workers Increases by 10% and the Real