To Compare the Purchasing Power of Nominal Wages in Two

question 80

Multiple Choice

To compare the purchasing power of nominal wages in two different years,one must

• A) compare the nominal values.
• B) deflate both quantities by a common price index.
• C) increase both quantities by the same percentage increase in a price index.
• D) adjust both quantities by the real interest rate.
• E) calculate the relative price change for both quantities.

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Definitions:

Financing Activities

Transactions and events that affect the equity and long-term liabilities of a company, reflecting how it raises funds and repays its investors.

Operating Activities

Activities that relate to the primary operations of a company, such as selling products or services and administrative expenses.

Taxes

Compulsory charges imposed by governments on individuals or entities to fund public services and infrastructure.

Investing Activity

Transactions involving the purchase and sale of long-term assets and investments, part of a company's cash flow statement that indicates how funds are used and generated.