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Sagot :
according to the classical dichotomy, the nominal wage increases when the money supply increases.
A nominal pay does not adequately reflect the purchasing power that it gives you because it is not inflation-adjusted. Simply put, prices often increase, meaning that a dollar now is worth more than a dollar tomorrow. Similarly, nominal earnings are accurate.
Your wages won't be able to buy as much if the wage rate doesn't keep pace with inflation. In fact, even if you get a pay raise, your purchasing power will be lower than it was the year before if the percentage increase in your pay is less than the percentage increase in inflation. Determine the real wage, which is the wage rate adjusted for inflation, in order to show how inflation affects earnings.
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