If Nominal Wage Rates Increase by 2 Percent Per Year

question 101

Multiple Choice

If nominal wage rates increase by 2 percent per year and the price level increases by 5 percent per year,real wages will:

• A)increase by 3 percent per year.
• B)increase by 5 percent per year.
• C)increase by 2 percent per year.
• D)decrease by 5 percent per year.
• E)decrease by 3 percent per year.

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Definitions:

Ordinary Annuities

A series of equal payments made at equal intervals, such as monthly or annually.

Annuities Due

An annuity for which the payment is due at the beginning of the period, as opposed to the end of the period.

Present Value

The now value of a future financial amount or series of cash flows, discounted at a particular rate of return.

Future Value

The value of an investment at a future date, considering compound interest or returns over time.