Suppose workers and firms expect the overall price level to increase by 4%. Given this...
Question:
Suppose workers and firms expect the overall price level to increase by 4%. Given this information, we would expect that?
A) the real wage will decrease by 4%.
B) the real wage will increase by 4%.
C) the nominal wage will increase by less than 4%.
D) the nominal wage will increase by more than 4%.
E) the nominal wage will increase by exactly 4%.
Real wage
The real wage is the nominal wage that is adjusted for the changes in the prices. Nominal wage explains the wages in the current period and changes in prices are given the rate of inflation.
Answer and Explanation: 1
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View this answerThe correct option is E) the nominal wage will increase by exactly 4%.
The workers are concerned more about their real wages rather than their...
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Unanticipated Inflation: Definition & Overview
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Chapter 5 / Lesson 12
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Learn about unanticipated inflation and understand how it occurs. Compare the advantages and disadvantages and see who benefits from unanticipated inflation.
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