If Nominal Wage Rates Increase by 5 Percent Per Year

question 7

Multiple Choice

If nominal wage rates increase by 5 percent per year and the price level increases by 3 percent per year,which of the following is correct?

• A)Real wages will increase by 2 percent per year.
• B)Real wages will increase by 3 percent per year.
• C)Real wages will decrease by 3 percent per year.
• D)Real wages will decrease by 2 percent per year.
• E)Real wages will remain constant.

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