3 years ago

Why are the real income levels of Americans affected by rising prices?

1 answer:

4 0

"Real Wages" are wages that are adjusted for inflation and rising prices. As prices rise, people are able to buy less and less with their "nominal" (aka un-adjusted) wages.

One example is gas for your car. If you make $1000 a month and gas goes up from $2.50 to $3, your un-adjusted wages stay the same (you still make $1000) but you can't buy as much of other things because your "real" wages have effectively gone down due to the price increase of gas.

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