Suppose There Is a 5 Percent Increase in the Nominal

question 76

Multiple Choice

Suppose there is a 5 percent increase in the nominal wages of workers in an economy.The annual rate of inflation in the economy is about 2 percent.Which of the following is true in this case?

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