Given the basic rule of thumb for the relationship among inflation, productivity and nominal wage increases, if wages rise by 5 percent and productivity increases 3 percent, one would predict inflation to be:
A. 2 percent.
B. 1 percent.
C. 0 percent.
D. ?1 percent.
Answer: A
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Imperfect policy credibility implies that
A) traders may not believe that a central bank will do what it says. B) a central bank may intentionally undermine its policies. C) central bank authorities cannot be trusted. D) currency traders will often try to undermine central bank movements.
Analyze the following statement: "I know the fact that prices have started to rise rapidly seems like bad news, but at least prices starting to go up means that output must be starting to go up as well."
What will be an ideal response?
If the demand for a consumer good decreases, the demand for resources required to make the good will
a. increase. b. remain the same, but the quantity demanded will increase. c. decrease. d. increase or decrease depending on whether the demand for the product is elastic or inelastic.
The minimum wage is a price ____, which tends to ___ the employment of unskilled workers.
A. ceiling; decrease B. ceiling; increase C. floor; decrease D. floor; increase