Suppose There Is a 5 Percent Increase in the Nominal

question 76

Multiple Choice

Suppose there is a 5 percent increase in the nominal wages of workers in an economy.The annual rate of inflation in the economy is about 2 percent.Which of the following is true in this case?

• A)Real wage would fall by about 10 percent.
• B)Real wage would increase by about 20 percent.
• C)Real wage would fall by about 25 percent.
• D)Real wage would increase by about 50 percent.
• E)Real wage would increase by about 3 percent.

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Definitions:

Utility Level

A measure of the satisfaction or happiness that individuals get from the consumption of goods and services.

Indifference Curve

A graph depicting combinations of goods that give the consumer equal satisfaction and utility.

Cookies

A small, sweet baked treat that comes in various flavors and can include ingredients like chocolate chips, nuts, or dried fruit.

Brownies

A type of chocolate baked treat, typically in the form of a square or rectangular cake slice.