9) See figure below: Wage rate (dollars per hour) 20 Nominal wage rate 10 Real w

Question

9) See figure below: Wage rate (dollars per hour) 20 Nominal wage rate 10 Real wage rate 982-1984 dollars 1984 992 2000 2008 Year The trends displayed in the table can best be explained by A) the nominal wage rate has increased at a rate about equal to the inflation rate, leaving real wages relatively flat B) the real wage rate has increased at a rapid rate. C) secxisc industries have increased as a proportion of the economy and they tend to have higher nominal wage rates. D) the inflation rate has not been taken into account for real wages E) None of the above can explain the trends in the figure.

Explanation / Answer

Answer : According to diagram the correct answer is

(A) the nominal wage rate has increased at a rate about equal to the inflation rate , leaving real wages relatively flat.

Because nominal wage rate means money income of workers and real income is the purchasing power of workers from their nominal income . According to diagram the real wage rate lies between $5 and $10. whereas nominal income continuously increasing because of inflation. This means purchasing power of workers remains relatively similar as before which is indicated by the relatively flat real wage rate in the given figure.

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