For real wages to increase, which of the following is necessary?
A) An employee's wage increase must be greater than the increase in the CPI.
B) An employee must receive a lump-sum wage increase equal to the increase in the CPI.
C) An employee's wage must simply increase.
D) The CPI must increase at least as much as the employee's wage.

Question

Quizplus · Accepted Answer

Real wages are calculated as nominal wages adjusted for inflation. Therefore, for real wages to increase, the increase in an employee's nominal wage must be greater than the increase in the CPI (inflation rate). If the nominal wage increase is equal to the inflation rate, then the real wage remains constant. If the nominal wage increase is less than the inflation rate, then the real wage decreases.

For Real Wages to Increase, Which of the Following Is