Chapter 3R, Problem 17MCQ

To determine

The question requires us to identify the true option when the real wage rate equals the nominal wage rate.

Explanation of Solution

Real wage is the adjusted wage, which is the wage rate a person gets after adjusting the current inflation rate while the nominal wage is the exact wage a person gets as compensation for his/her work.

There are three possible situations:

1. If the real GDP in a year is greater than the nominal GDP in the same year, then it reflects the higher price in the base year. 
2. If the real GDP in a year is less than the nominal GDP in the same year, then it reflects prices were lower in the base year than in the current year.<
3. If the real wage equals the nominal wage rate, then the price level in the current year is the same as the base year price.

So, option “b” is correct.