If the Price Level Rises by 3 Per Cent and Workers

question 51

Multiple Choice

If the price level rises by 3 per cent and workers' money wage rates increase by 2 per cent, then the

• A)real wage rate increases.
• B)quantity of labour demanded does not change because there is no change in the real wage rate.
• C)quantity of labour demanded will increase.
• D)quantity of labour demanded will decrease.

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Definitions:

Real Wage

Refers to wages that have been adjusted for inflation, representing the purchasing power of income.

Nominal Wage

The wage paid to labor in current dollar terms, without adjustment for inflation.

Goods and Services

The output of an economy that fulfills consumer needs, with goods being tangible products and services being intangible activities performed for consumers.

Nominal Wage

The amount of money paid to an employee without adjustments for inflation or purchasing power, expressed in current currency terms.