Explain Why an Increase in Nominal Wage Does Not Necessarily

question 143

Essay

Explain why an increase in nominal wage does not necessarily imply an increase in real wage?

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Definitions:

Net Income

The total profit of a company after all expenses, including taxes and interest, have been deducted from total revenue; also known as net earnings or net profit.

Net Present Value

A method used in capital budgeting to evaluate the profitability of an investment by calculating the difference between the present value of cash inflows and outflows.

Internal Rate of Return

A metric used in capital budgeting to estimate the profitability of potential investments, calculated as the discount rate that makes the net present value of all cash flows from a particular project equal to zero.

Time Value

The principle that money currently in hand is valued higher than an identical amount received in the future, owing to its capacity to generate earnings.