Learning Path
Question & Answer1
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Review Options3
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Explore TopicChoose the Best Answer
A
A country experiences a surge in exports, leading to higher demand for labor, which increases nominal wages and real wages.
B
A country sees higher exports but faces rising prices due to inflation, resulting in unchanged nominal wages and declining real wages.
C
A decrease in exports causes employers to raise nominal wages to attract workers, thereby increasing real wages.
D
Increased exports lead to a reduction in the price level, which boosts real wages while nominal wages remain constant.
Understanding the Answer
Let's break down why this is correct
Answer
When a country increases its exports, it often leads to higher demand for goods produced locally. This increased demand can result in more jobs and potentially more hours for workers, even if their nominal wages, or the actual dollar amount they earn, stay the same. For example, if a factory starts exporting more toys, it may need to hire more workers or have current employees work overtime. This means that even though the hourly pay hasn't changed, workers might take home more money because they are working more hours. In the short run, this can lead to higher real wages, which is the purchasing power of the money they earn, as they can buy more goods with the same amount of money.
Detailed Explanation
When a country exports more, prices can go up due to demand. Other options are incorrect because This option suggests that higher exports automatically raise wages; This option implies that less exports lead to higher wages.
Key Concepts
Real Wages
Exports Impact
Aggregate Demand
Topic
Real Wages and Exports Impact
Difficulty
medium level question
Cognitive Level
understand
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