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Explain the differences between the nominal wage and the real wage. Why should a worker care...

Explain the differences between the nominal wage and the real wage. Why should a worker care about his real wage more than his nominal wage?

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Answer #1

Nominal wage is the money value of wage. On the other hand, real wage is the wage in terms of goods and services. Real wage take into account the change in price level while nominal wage does not take it into account.

Worker care about real wage because it determines their purchasing power. Increase in real wage means they are able to buy more goods and services while increase in nominal wage means they will get more money but irrespective of market price of goods and services.

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