Suppose Inflation Is Expected to Be 5 Percent Next Year

question 62

Multiple Choice

Suppose inflation is expected to be 5 percent next year, and you and your employer agree to a 6 percent increase in your nominal, or monetary, wage. If inflation turns out to be 7%, what is your real wage increase?

• A) 1 percent
• B) -1 percent
• C) 0 percent
• D) -5 percent
• E) 6 percent

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Definitions:

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A method of expressing numbers as a product of a coefficient and a power of 10, simplifying how very large or very small numbers are represented.