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Inflation Can Act as a Safety Valve Workers will more readily accept a real wage cut that arises from an increase in the consumer prices than a cut in their nominal wage rate. Source: FT.com, May 28, 2009 Explain why inflation influences a worker's real wage rate. Why might this observation be true? Question content area bottom Part 1 Inflation ___ the real wage rate, everything else remaining the same because _. A. raises; the real wage rate is calculated as (Nominal wage ratetimes×CPI)divided by÷100 B. lowers; the real wage rate is calculated as (Nominal wage ratedivided by÷CPI)times×100 C. sometimes lowers and sometimes raises; the real wage rate moves in cycle with the inflation rate D. does not change; wage rates are determined independently of the price level Part 2 People are more likely to accept a real wage cut that arises from an increase in the price level than a cut in their nominal wage rate because _. A. inflation decreases the real wage rate gradually and a cut in the nominal wage decreases the real wage rate suddenly B. a cut in the real wage rate does not change the quantity of goods and services a worker can buy but a cut in the nominal wage rate does change the quantity of goods and services a worker can buy C. a cut in the nominal wage rate comes from management and a cut in the real wage rate comes from government D. workers will quit before they will accept a cut in their nominal wage rate Inflation _ the real wage rate, everything else remaining the same because _.People are more likely to accept a real wage cut that arises from an increase in the price level than a cut in their nominal wage rate because ___.

Inflation Can Act as a Safety Valve
Workers will more readily accept a real wage cut that arises from an increase in the consumer prices than a cut in their nominal wage rate.
Source: FT.com, May 28, 2009
Explain why inflation influences a worker's real wage rate. Why might this observation be true?
Question content area bottom
Part 1
Inflation _______ the real wage rate, everything else remaining the same because _______.
A.
raises;
the real wage rate is calculated as (Nominal wage
ratetimes×CPI)divided by÷100
B.
lowers;
the real wage rate is calculated as (Nominal wage
ratedivided by÷CPI)times×100
C.
sometimes lowers and sometimes raises;
the real wage rate moves in cycle with the inflation rate
D.
does not change;
wage rates are determined independently of the price level
Part 2
People are more likely to accept a real wage cut that arises from an increase in the price level than a cut in their nominal wage rate because _______.
A.
inflation decreases the real wage rate gradually and a cut in the nominal wage decreases the real wage rate suddenly
B.
a cut in the real wage rate does not change the quantity of goods and services a worker can buy but a cut in the nominal wage rate does change the quantity of goods and services a worker can buy
C.
a cut in the nominal wage rate comes from management and a cut in the real wage rate comes from government
D.
workers will quit before they will accept a cut in their nominal wage rate
Inflation _______ the real wage rate, everything else remaining the same because _______.People are more likely to accept a real wage cut that arises from an increase in the price level than a cut in their nominal wage rate because _______.

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