If the Price Level Increases by 5 Percent and the Nominal

question 57

True/False

If the price level increases by 5 percent and the nominal wage increases by 3.5 percent,the real wage will decrease by 1.5 percent.

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Definitions:

Variable Costs

Expenses that change in proportion to the activity of a business, such as costs for raw materials or production labor.

Fixed Costs

Costs that remain constant regardless of the amount of goods produced or sold, like lease payments or employee wages.

Net Income

The amount of profit left after all operating expenses, taxes, and costs have been subtracted from total revenue.

Variable Costs

Expenses that fluctuate with the level of output or sales, such as raw materials and direct labor.