**Understanding Inflation and Real Salary Impact**The following question examines the concept of inflation and its impact on purchasing power:"The rate of inflation over the last two years has averaged 2% per year. At the same time, John feels like he is able to purchase fewer goods and services with his annual salary. Therefore:"- ○ John's real salary must have declined- ○ John must not have received any pay raises- ○ Both John's nominal and real salaries must have declined- ○ John's nominal salary must have declinedThis question helps students understand how inflation affects real and nominal salaries. It prompts a discussion on how the purchasing power of a salary might decrease even if the nominal amount stays the same, unless it adjusts for inflation.

The rate of inflation over the last two years has averaged 2% per year. Ati John feels like he is able to purchase fewer goods and services with his ann Therefore: John must not have received any pay raises Both John's nominal and real salaries must have declined O John's nominal salary must have declined O John's real salary must have declined

The rate of inflation over the last two years has averaged 2% per year. Ati John feels like he is able to purchase fewer goods and services with his ann Therefore: John must not have received any pay raises Both John's nominal and real salaries must have declined O John's nominal salary must have declined O John's real salary must have declined

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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