Answer to Question #71568 in Macroeconomics for Emily Rahravan

Question

If the US government has heavy spending would this massive spending cause 1) the real wage to rise 2) the nominal wage to rise 3) both 4) neither

Answer 1

Massive government spending by the government will lead to increase in inflation which will increase nominal wage rate but real wage rate will decrease as ( real wage rate = Nominal wage rate - inflation), higher the inflation lower the real wage rate.
if massive government spending is completely financed by printing money it will increase inflation too much leads to massive fall in real wage rate