If the relative price of one product rises and labor is mobile, then:
a. the percentage increase in the equilibrium real wage will be exactly the same as the percentage increase in the relative price.
b. the percentage increase in the equilibrium real wage will be lower than the percentage increase in the relative price.
c. the percentage increase in the equilibrium real wage will be higher than the percentage increase in the relative price.
d. the equilibrium real wage will not change.
Ans: b. the percentage increase in the equilibrium real wage will be lower than the percentage increase in the relative price.
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Economist Edward Prescott is associated with the
A) early spread of the old Keynesian approach. B) creation of the "fooling" model. C) creation of the first "New Classical" approach. D) creation of the "real business cycle" model.
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