If the Cost of Living Is Higher in Richer Cities

question 48

Multiple Choice

If the cost of living is higher in richer cities than in poorer cities, and the nominal minimum wage were the same in every city, then the real purchasing power of the minimum wage would necessarily be

• A)higher in the richer cities.
• B)higher in the poorer cities.
• C)lower in the poorer cities.
• D)independent of the cost of living in any city.

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Definitions:

Inflation Rate

A general rise in prices for goods and services across an economy over a certain timeframe.

Nominal

Nominal values refer to monetary values or economic statistics not adjusted for inflation, reflecting their face value.

Real Interest Rate

The interest rate corrected for the effects of inflation.