Suppose That the Average Level of Prices in the Economy

question 5

Multiple Choice

Suppose that the average level of prices in the economy fell 4% and workers' wages were cut by 2%. Which of the following statement(s) is (are) TRUE?
I. Real wages of workers increased.
II. The nominal wages of workers were cut.
III. Workers who were loss averse felt worse off.

• A) I
• B) II and III
• C) I, II, and III
• D) II

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Definitions:

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An approach in psychology focusing on the physical and biological bases of behavior.