Question

The prices of products and the wages paid to labor each change over time. Describe how prices and wages have changed over time. For your description of wage changes, include a description of how nominal and real wages change

Answer 1

Nominal wage is the amount of money they receive while real wage decide their purchasing capacity from the money they receive.

Assume there is rise in general price level in the economy. As price level have increased, workers would be able to purchase fewer goods which reduces their real wages. After some time of price rise, workers realize that there is actually reduction in their real wages which induces them to demand a hike in their nominal wages such that they can purchase same unit of units as before the price hike.