Suppose there is a 3 percent increase in the nominal wages of workers in an economy.The annual rate of inflation in the economy is about 6 percent.Which of the following is true in this case?
A)Real wages would fall by about 3 percent.
B)Real wages would increase by about 20 percent.
C)Real wages would fall by about 25 percent.
D)Real wages would increase by about 50 percent.
E)Real wages would increase by about 10 percent.

Question

Quizplus · Accepted Answer

Real wages are calculated by adjusting nominal wages for inflation. In this case, since the rate of inflation (6%) is higher than the increase in nominal wages (3%), real wages would decrease by approximately 3%.

Suppose There Is a 3 Percent Increase in the Nominal