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Question

Difficulty: HardFactors of Production and Their Rewards

In commercial economics, real wages represent the actual monetary sum received by a worker for services rendered, whereas nominal wages measure the quantity of goods and services that monetary reward can purchase.

Answer: Answer

Answer

The statement is False. Nominal wages are the actual monetary earnings received by labour, while real wages represent the purchasing power of those earnings.
The statement is false because nominal wages describe the monetary reward received by workers, while real wages measure the volume of goods and services those monetary rewards can command in the market.

Step-by-Step Solution

1
Analyze the definition of nominal (money) wages as a factor reward for labour.
Nominal wages refer strictly to the numerical cash amount paid to a worker for services rendered.
Establishing the monetary basis of labour rewards.
2
Analyze the definition of real wages.
Real wages represent the actual volume of goods and services that nominal wages can buy, taking the price level/inflation into account.
Evaluating how price changes affect the actual value of labour rewards.
3
Compare the standard economic definitions with the given statement.
The statement incorrectly attributes the direct monetary sum to real wages and purchasing power to nominal wages, reversing the two concepts.
Identifying the error in the assertion to determine truth value.

Key Concept

Distinction between Nominal Wages and Real Wages
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Topics

Factors of Production and Their Rewards

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