If Nominal Wage Rates Increase by 5 Percent Per Year

Multiple Choice

If nominal wage rates increase by 5 percent per year and the price level increases by 3 percent per year,which of the following is correct?

A) Real wages will increase by 2 percent per year.
B) Real wages will increase by 3 percent per year.
C) Real wages will decrease by 3 percent per year.
D) Real wages will decrease by 2 percent per year.
E) Real wages will remain constant.