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15 January, 16:38

Over the past year, Eli has been working very hard. His employer has taken notice and is giving Eli a 6% raise in salary. During this past year, overall prices in the economy have increased by 4%. Given this information, Eli's real wage has:a) stayed constant. b) increased by 2%. c) increased by 6%. d) decreased by 4%.

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  1. 15 January, 19:13
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    b) increased by 2%.

    Explanation:

    If Eli has been granted a 6% raise in salary.

    In addition, during the year, overall prices in the economy have increased by 4%. Given this information, Eli's real wage has increased by 2%.

    The nominal rate of increase is 6% but the real rate of increase is gotten by the nominal rate minus the inflation rate

    Therefore Real rate of wage increase for Eli = 6% - 4% = 2%
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