If the nominal wage of workers increases by 10% and the real wage of workers remains unchanged, then the overall price level must have:

	a.	decreased by less than 10%.
	b.	increased by more than 10%.
	c.	increased by 10%.
	d.	decreased by 10%.

Solutions

Expert Solution

Real wage = Nominal wage / Price level

% change in (A/B) = % change in A + % change in B

Using above formulas we have :

% change in (Real wage) = % change in (Nominal wage / Price level)

=> % change in (Real wage) = = % change in (Nominal wage) - % change in (Price level)

Here Real wage does not changes => % change in (Real wage) = 0 and Nominal wage increased by 10% => % change in (Nominal wage) = 10%

=> 0 = 10% - % change in (Price level)

=> % change in (Price level) = 10%

Hence overall price level will increase by 10%.

Hence, the correct answer is (c) increased by 10%

Rahul Sunny answered 1 year ago

Next > < Previous

Related Solutions

When the price of fresh fish increases 10%, quantity demanded is unchanged. The price elasticity of...

When the price of fresh fish increases 10%, quantity demanded is unchanged. The price elasticity of demand for fresh fish is Your answer: perfectly inelastic b perfectly elastic c inelastic d unitary elastic

If nominal income increases, then real income

If nominal income increases, then real income a. increases if you buy only the goods included in the consumer price index (CPI) and the majority of those goods get cheaper. b. increases if the price index falls. c. increases. d. decreases. e. increases if the percent increase in price index rises by more than the percent change in nominal income.

Completed If product demand is high, a firm's demand for labour _______ (increases/decreases/remains unchanged). Because of...

Completed If product demand is high, a firm's demand for labour _______ (increases/decreases/remains unchanged). Because of this we say labour demand is a ______ demand. How can we demonstrate this phenomenon on a graph of labour demand?

Consider the Keynesian adjustment process in which the price level and nominal wage are fixed in...

Consider the Keynesian adjustment process in which the price level and nominal wage are fixed in the short run. The Keynesian theory assumes that aggregate real output will adjust to the aggregate demand following a disturbance. For each of the following changes, what are the short-run effects on the real interest rate and output? Use the IS-LM curve framework and aggregate supply and demand curves to help explain your reasoning when it is relevant in developing the implications of the particular disturbance. (a) The...

3. If the quantity of a good demanded remains unchanged as its price changes, the coefficient...

3. If the quantity of a good demanded remains unchanged as its price changes, the coefficient of price elasticity of demand is ( a ) greater than 1, (b ) equal to 1, ( c) smaller than 1 or (d) zero.

Many macroeconomic statistics increase over time. Examples include the price level, the nominal wage level, the...

Many macroeconomic statistics increase over time. Examples include the price level, the nominal wage level, the real wage level, and the nominal money supply level. What are normal rates of growth for these four data series?

If the magnitude of \(\vec{B}\) increases while its direction remains unchanged, how will the magnetic flux through the coil change?

If the magnitude of \(\vec{B}\) increases while its direction remains unchanged, how will the magnetic flux through the coil change? Check all that apply. The flux is unchanged because the position of the coil with respect to \(\vec{B}\) unchanged. The flux increases because the magnitude of \(\vec{B}\) increases. The flux decreases because the magnitude of \(\vec{B}\) increases. The flux is unchanged because the surface area of the coil is unchanged.

(A) (B) (C) Price Level Real GDP Price Level Real GDP Price Level Real GDP 110...

(A) (B) (C) Price Level Real GDP Price Level Real GDP Price Level Real GDP 110 290 100 215 110 240 100 265 100 240 100 240 95 240 100 265 95 240 90 215 100 290 90 240 a. Which set of data illustrates aggregate supply in the immediate short-run in North Vaudeville? The data in (Click to select)CAB. Which set of data illustrates aggregate supply in the short run in North Vaudeville? The data in...

Explain why a nominal increase in an exchange rate that leaves real exchange rate unchanged may...

Explain why a nominal increase in an exchange rate that leaves real exchange rate unchanged may still an impact on the profit margins of a MNC.

a.Consumer confidence increases. What is the level of real GDP in long run? b.When the price...

a.Consumer confidence increases. What is the level of real GDP in long run? b.When the price level rises, what happens to firms’ profit in short run?

Subjects