When nominal wages increase, workers benefit if the rise outpaces inflation. Real wages, considering inflation, further determine workers' well-being. If real wages rise, workers experience an improved standard of living.
When nominal wages increase, workers experience a change in their purchasing power and overall well-being. Nominal wages represent the absolute dollar amount earned by workers, irrespective of inflation or changes in the cost of living. If nominal wages rise and outpace inflation, workers are better off. This is because they have more money to spend on goods and services, leading to an improved standard of living. However, if nominal wage increases fail to keep pace with inflation, workers may be worse off, as their purchasing power diminishes.
On the other hand, real wages take inflation into account, providing a more accurate measure of the actual purchasing power of workers. When real wages rise, indicating an increase in purchasing power after adjusting for inflation, workers are better off. This reflects an improvement in their ability to buy goods and services, contributing to an enhanced quality of life. Therefore, the relationship between nominal and real wages is crucial in determining the true impact on workers' economic well-being.
Complete question below:
Question:
When nominal wages increase, workers are:
a. better off; better off
b. worse off; better off
c. either worse or better off; better off
d. better off; either worse or better off