If the Price Level Rises by 5 Percent and the Nominal

question 194

Multiple Choice

If the price level rises by 5 percent and the nominal wage rises 3 percent,the real wage

• A)falls by 2 percent
• B)falls by 8 percent
• C)rises by 2 percent
• D)rises by 8 percent
• E)remains constant

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Definitions:

Discretionary Monetary Policy

A policy that involves the deliberate manipulation of interest rates and money supply by a central bank to influence the economy.

Capitalistic Economy

An economic system characterized by private ownership of the means of production and the creation of goods or services for profit.

Government Policies

Strategies and decisions made by governmental bodies to govern social, economic, and environmental matters affecting the nation or region.

Money Supply

The cumulative total of all money assets within an economy at a particular point in time.