Nominal and real wages align under zero inflation

Steps:

• Zero inflation means the overall price level remains constant.
• Real wage equals nominal wage divided by the price level.
• With constant prices, changes in nominal wages directly determine changes in real wages.
• Therefore, nominal wages falling implies real wages falling.

Why A is correct:

• Under zero inflation, falling nominal wages with constant prices cause real wages to fall proportionally, per the real wage formula.

Why the others are wrong:

• B: Falling nominal wages with constant prices cannot make real wages rise, as real wages would also fall.
• C: Rising nominal wages with constant prices make real wages rise, not fall.
• D: Unchanged nominal wages with constant prices leave real wages unchanged, not rising.

Final answer: A