An associate professor of physics gets a $200 a month raise. She figures that with her new monthly salary she can buy more goods and services than she could buy last year.

a. Her real and nominal salary have risen.

b. Her real and nominal salary have fallen.

Exercise before Midterm 3 Principles of Macroeconomics

c. Her real salary has risen and her nominal salary has fallen.

d. Her real salary has fallen and her nominal salary has risen.

The correct answer is a. Her real and nominal salary have risen.

Explanation:

The term nominal salary refers to the salary literally expressed in money; It is the sum of money paid to the worker for the work done during the stipulated day. When referring to the nominal salary we cannot give ourselves a general idea about the level or real value of the salary. The true value of this salary depends entirely on the level of the prices that correspond to the objects of personal consumption, also on the value of the services that are required, as well as the volume of taxes, among other common expenses.

For its part, the real salary refers to the salary expressed with respect to livelihoods and services available to the worker with his salary; Indicates the amount of consumer items that the worker is able to acquire, as well as services that a worker can buy with his nominal salary (which is handled in the monetary amount that the worker receives)