Explain why there is an inverse relationship between wage inflation and unemployment as aggregate demand changes
In an economy with increasing aggregate demand, businesses will expand production and in so doing will need to hire more workers. As the unemployment rate falls, businesses will find that they have to offer a higher wage in order to attract new workers in this tighter labor market. Therefore, there is an inverse relationship between the unemployment rate and wage rates (or wage inflation).
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Which of the following statements is TRUE?
A) APC + APS = 1 B) APC + APS < 1 C) APC + MPS = 1 D) APC + APS + MPC + MPS = 1
An economic theory claims that a rise in gasoline prices will cause gasoline purchases to fall, Ceteris paribus. The phrase "Ceteris paribus" means that:
a. other relevant factors like consumer incomes must be held constant. b. the gasoline prices must first be adjusted for inflation. c. the theory is widely accepted but cannot be accurately tested. d. consumers' need for gasoline remains the same regardless of the price.
Comparing the monopoly firm with a perfectly competitive firm reveals that:
a. the competitive firm sells less quantity. b. the monopoly firm charges a lower price. c. the competitive firm's price is above MC. d. None of these is revealed when the two firm are compared.
Which of the following will increase the level of human capital in an economy?
A. An increase in land mass. B. A decrease in the population. C. An increase in literacy rates. D. An increase in factory capacity.