Inflation is occurring in a nation; the implication(s) of this is/are:
A) both real and nominal wages are rising.
B) both real and nominal wages are falling.
C) almost none, because most wages increase at about the same rate as inflation.
D) holding nominal wages constant, the real wage would rise.
E) holding nominal wages constant, the real wage would fall.

Question

Quizplus · Accepted Answer

Inflation reduces the purchasing power of the currency, meaning that prices of goods and services are increasing. If nominal wages (wages in current dollars) remain constant, the same amount of money that used to buy more goods and services now buys less. Therefore, holding nominal wages constant, the real wage (wages adjusted for inflation and purchasing power) would fall.

Inflation Is Occurring in a Nation; the Implication(s) of This