Business, 18.01.2021 14:00 cdxxc9324

Caroline's paycheck each week is $12 per hour times the number of hours she works. Caroline thus currently earns a _ wage of $12 per hour. Suppose the price of sparkling water is $3 per gallon. The amount of sparkling water she can buy with her paycheck is _ of sparkling water, which represents her _ wage. When workers and firms negotiate compensation packages, they have expectations about the price level (and changes in the price level) and agree on a _ weage with those expectations in mind. If the price level turns out to be higher than expected, a worker's _ wage is _ than both the worker and employer expected when they agreed to the wage.

Suppose that Caroline and her employer both expected inflation to be 3% between 2011 and 2012. They signed a two-year contract stipulating that Caroline would earn $12 per hour in 2011 and $12.36 per hour in 2012. However, actual inflation between 2011 and 2012 turned out to be 5% rather than the expected 3%. For example, suppose the price of sparkling water rose from $3 per gallon to $3.15 per gallon. This means that between 2011 and 2012, Caroline's nominal wage _ by _ and her real wage _ by approximately _.

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