A valid explanation for real wage growth is?

A. an increase in the rate of productivity
B. the rising cost of capital accumulation
C. a contraction of employment in service industries
D. an increase in the quantity of labour

Correct Answer:

Option A – an increase in the rate of productivity

Explanation

Real wage growth is largely due to increased in economic activity creating competition between businesses to attract and retain workers. The higher the rate of economic activities (production, buying and selling) in the economy, the higher the real wage growth.