Suppose workers expect the inflation rate to be 3.6 percent and they receive a nominal wage increase of 7.5 percent.If the actual inflation rate turns out to be 2.8 percent, workers will receive a lower real wage than expected.

Question

Quizplus · Accepted Answer

Workers will receive a higher real wage than expected because the actual inflation rate (2.8%) is lower than the expected inflation rate (3.6%), meaning their purchasing power increases more than anticipated.

Suppose Workers Expect the Inflation Rate to Be 3