Suppose the Inflation Rate Is 6 Percent This Year

question 35

Multiple Choice

Suppose the inflation rate is 6 percent this year. If nominal wages increase by 6 percent, real wages will

• A) increase by 6 percent.
• B) increase by 9 percent.
• C) decrease by 12 percent.
• D) not change.

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Definitions:

Frequent-Flyer Miles

Loyalty program points awarded by airlines to passengers who travel with them, which can be redeemed for flight discounts, upgrades, or other rewards.

Noncompensatory Decision

A decision-making process in which options are evaluated in a way that one attribute cannot make up for a disadvantage in another.

Compensatory Decision

A decision-making process where the consumer evaluates the positive and negative attributes of each alternative and makes a trade-off to arrive at a decision.

Unrealistically High

describes a level or amount that exceeds practical possibilities or reasonable expectations, often in context to prices or goals.