In a particular year, if the price level rises by 4 percent and the nominal wage of workers rises by 6 percent, we can conclude that the real wage has:
a. fallen by 2 percent
b. fallen by 10 percent.
c. increased by 2 percent.
d. increased by 10 percent.
e. remained constant.
c
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Suppose a recession occurs as a result of a supply shock, and instead of the economy naturally working its way back to equilibrium, the government uses policy to shift the aggregate demand curve to fight the recession. Using policy this way would
A) quickly result in a new, higher level of real GDP and a permanently lower price level. B) bring real GDP back to potential GDP more slowly but would bring the price level back to the original price level more quickly. C) bring the price level back to its original level more quickly but would result in a permanently lower level of potential GDP. D) bring real GDP back to potential GDP more quickly but would result in a permanently higher price level.
Various executive compensation plans have been employed to motivate managers to make decisions that maximize shareholder wealth. These include:
a. cash bonuses based on length of service with the firm b. bonuses for resisting hostile takeovers c. requiring officers to own stock in the company d. large corporate staffs e. a, b, and c only
The real-income effect of a price change is most significant when
A. the good under consideration constitutes a major portion of the consumer's budget. B. the marginal utility per dollar spent on the last unit is high. C. the substitution effect is significant too. D. the substitution effect is insignificant.
What happens to the LRAS curve when the level of potential output for an economy increases over time?
What will be an ideal response?