Assume Contracts Between Workers and Employers That Call for an Increase

question 22

Multiple Choice

Assume contracts between workers and employers that call for an increase in the wage rate of 5 percent are based on an expected inflation rate of 3 percent. Should inflation actually be 6 percent, then:

• A) Nominal wages fall by 5 percent
• B) Real wages fall by 6 percent
• C) Nominal wages fall by 1 percent
• D) Real wages fall by 1 percent

---

Definitions:

Change

The process or act of becoming different, which can occur in various contexts such as personal life, nature, or technology.

Private Distributor Brand

Products branded by a retailer for sale in its own stores, typically positioned as lower-cost alternatives to national brands.