Typically if real wages fall,the quantity demanded of labor rises.If workers agree to 3% wage increases for a four-year period and inflation is more than 3%,then,based on this information alone:
A) workers will have higher real wages because they get paid more.
B) the quantity demanded of labor will increase, because real wages fell.
C) workers must experience money illusion.
D) the quantity demanded of labor will fall.
E) the demand, but not the quantity demanded, for labor will fall.

Question

Quizplus · Accepted Answer

If inflation is more than 3%, the real wages of workers will fall despite the nominal wage increase, leading to an increase in the quantity demanded of labor.

Typically If Real Wages Fall,the Quantity Demanded of Labor Rises