If workers' nominal wages have risen by 50% over a ten-year period and prices have increased by 40% in that same period, then we can safely conclude that the amount of goods and services that workers can buy has

Question

Vanessa Velasquez

Business

3 March, 17:41

If workers' nominal wages have risen by 50% over a ten-year period and prices have increased by 40% in that same period, then we can safely conclude that the amount of goods and services that workers can buy has

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Answers (1)

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Joyce Morse · Answer 1

increased by 10%

Explanation:

When we consider that nominal value of worker's wage has increased in 10 years the means his purchasing power has increased by 50%. He can purchase more with his wages.

But also it was stated that prices also went up 40% during this period. This can be as a result of inflation, resulting in reduced purchasing power.

The net increase in purchasing power of the worker = Increase in wages - Increase in prices

= 50-40 = $10