Your Boss Gives You an Increase in the Number of Dollars

question 185

Multiple Choice

Your boss gives you an increase in the number of dollars you earn per hour. This increase in pay makes

• A) your nominal wage increase. If your nominal wage rose by a greater percentage than the price level, then your real wage also increased.
• B) your nominal wage increase. If your nominal wage rose by a greater percentage than the price level, then your real wage decreased.
• C) your real wage increase. If your real wage rose by a greater percentage than the price level, then your nominal wage also increased.
• D) your real wage decrease. If your real wage rose by a greater percentage than the price level, then your nominal wage decreased.

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Definitions:

Fully Rational

A term describing decision-makers who, with complete information, are able to consistently make choices that maximize their utility or profit.

Loss Aversion

A cognitive bias where the pain of losing is psychologically about twice as powerful as the pleasure of gaining.

Framing

In behavioral economics, the way in which choices are presented to consumers, affecting their decision-making and preferences.

Moral Persuasion

The act of convincing others to adopt certain behaviors or beliefs based on ethical or moral reasoning.