Suppose You Received a 5 Percent Increase in Your Nominal

question 13

Multiple Choice

Suppose you received a 5 percent increase in your nominal wage. Over the year, inflation ran about 2 percent. Which of the following is true?

• A) Your real wage fell.
• B) Your nominal wage fell.
• C) Both your nominal and real wages decreased.
• D) Although your nominal wage fell, your real wage increased.
• E) Both your nominal and real wages increased.

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Definitions:

Operating Expenses

The costs associated with running a day-to-day business operation, excluding the cost of goods sold.

Residual Income

The income that remains after all personal debts and expenses have been paid, or in business, the net income after deducting cost of capital from operating profit.

Investment Center

A business segment within a company for which the manager has control and responsibility over cost, revenue, and investments.

Target Income

The specific amount of net income that a company aims to achieve for a certain period.