Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
Real wages decline due to rising price levels
B
Real wages increase because of higher demand for labor
C
Real wages remain unchanged regardless of exports
D
Real wages fluctuate only if nominal wages are adjusted
Understanding the Answer
Let's break down why this is correct
Answer
When exports increase, it means that a country is selling more goods and services to other countries. This can lead to more jobs and higher demand for workers in industries that produce those exported goods. If nominal wages, which are the actual dollar amounts workers earn, do not change, the increased demand for goods can cause prices to rise. As prices go up, the purchasing power of those fixed nominal wages decreases, meaning workers can buy less with the same amount of money. For example, if a factory worker earns $20 an hour but prices for food and housing rise due to increased exports, that worker's real wage, or the value of their income in terms of what it can buy, effectively falls.
Detailed Explanation
When exports go up, more money flows into the economy. Other options are incorrect because Some might think that more exports mean more jobs, which raises pay; It's a common belief that exports don't affect wages at all.
Key Concepts
Real Wages
Exports
Aggregate Demand
Topic
Real Wages and Exports Impact
Difficulty
medium level question
Cognitive Level
understand
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