Suppose There Is a 3 Percent Increase in the Nominal

question 107

Multiple Choice

Suppose there is a 3 percent increase in the nominal wages of workers in an economy.The annual rate of inflation in the economy is about 6 percent.Which of the following is true in this case?

• A)Real wages would fall by about 3 percent.
• B)Real wages would increase by about 20 percent.
• C)Real wages would fall by about 25 percent.
• D)Real wages would increase by about 50 percent.
• E)Real wages would increase by about 10 percent.

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Definitions:

Confidence Interval

A cadre of values, from the statistical evaluation of samples, that is designed to encircle the value of an undetermined parameter within a population.

Level of Confidence

The degree of certainty, often expressed as a percentage, that a parameter lies within a specified range of values.

Hypothesis Testing

A statistical method used to determine if there is enough evidence in a sample of data to infer that a certain condition is true for the entire population.

Interval Estimation

Estimation of a population parameter with a range, or interval, of values within which one has a certain degree of confidence the population parameter falls.