Suppose the nominal wages of workers in an economy increase by 7 percent while the price level rises by 5 percent.The real wages:
A)would increase by about 2 percent.
B)would decrease by about 5 percent.
C)would increase by about 50 percent.
D)would increase by about 10 percent.
E)would decrease by about 25 percent.

Question

Quizplus · Accepted Answer

Real wages = (Nominal wages/Price level) x 100
If nominal wages increase by 7 percent and the price level rises by 5 percent, then the real wages would increase by (7-5) = 2 percent. Therefore, the correct answer is A.

Suppose the Nominal Wages of Workers in an Economy Increase