If the nominal wage rises from $10 per hour in period 1 to $15 per hour in period 2 as the expected price level rises from 1 to 3 while the actual price level rises from 4 to 5, then from period 1 to period 2:
a. the nominal wage is falling.
b. the actual real wage is falling.
c. the expected real wage is falling.
d. all of the above.
Answer: c. the expected real wage is falling.
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Increasing opportunity cost implies that
A) producing additional units of one good results in proportionately smaller reductions in the output of the other good. B) producing additional units of one good results in increasing amounts of lost output of the other good. C) the production possibilities frontier will be a straight line. D) the society will be producing inside its production possibilities frontier.
By definition, a firm that practices satisficing
a. maximizes its sales, not its profits. b. makes acceptable decisions, though not necessarily optimal ones. c. satisfies government guidelines instead of consumer demands. d. minimizes the cost of gathering enough information to make an optimal decision.
For a given real interest rate, an increase in inflation makes the after-tax real interest rate
a. decrease, which encourages savings. b. decrease, which discourages savings. c. increase, which encourages savings. d. increase, which discourages savings.
Which would be characteristic of a capitalist economy?
a. Reliance on international treaties. b. Competition and unrestricted markets c. Democracy d. Government ownership of the factors of production