Question
The real wage rate is defined as the wage rate divided by
a. the price level.
b. nominal GDP.
c. the money supply.
d. the interest rate.
a. the price level.
b. nominal GDP.
c. the money supply.
d. the interest rate.
Ask by Donnelly George. in the United States
Mar 21,2025
Upstudy AI Solution
Tutor-Verified Answer
Answer
The real wage rate is the wage rate divided by the price level.
Solution
The real wage rate is defined as the wage rate divided by:
a. the price level.
This means that the real wage rate reflects the purchasing power of the wage rate, taking into account the effects of inflation or changes in the price level.
Answered by UpStudy AI and reviewed by a Professional Tutor
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Simplify this solution Bonus Knowledge
The real wage rate gives us a clearer picture of how much purchasing power workers actually have. By adjusting the nominal wage rate for the price level, it reflects the amount of goods and services that can be bought, allowing workers to evaluate their standing in the economy better. So, the answer is definitely a. the price level.
Real wages play a crucial role in economic discussions, especially when examining living standards and inflation. For instance, if nominal wages rise but prices increase even faster, the real wage can effectively decline, highlighting the importance of not just earning more but also understanding the economy’s health.
