Wages and prices are many times higher today than they were 30 years ago, yet people do not work a lot more hours or buy fewer goods. How can this be?
Inflation has raised the general price level. An increase in the general price level has no effect on real variables in the long run. Wages are higher, but so are prices. Prices are higher, but so are wages and incomes. In the long run, people change their behavior in response to changes in real variables, not nominal ones.
You might also like to view...
The table above shows the marginal costs and marginal benefits of college education. The marginal social benefit of college education at the efficient amount of enrollment is
A) $20,000 per year. B) $16,000 per year. C) $12,000 per year. D) $14,000 per year.
The number and availability of discount brokers has grown rapidly since the mid-1970s. The efficient markets hypothesis predicts that people who use discount brokers
A) will likely earn lower returns than those who use full-service brokers. B) will likely earn about the same as those who use full-service brokers, but will net more after brokerage commissions. C) are going against evidence suggesting that full-service brokers can help outperform the market. D) are likely to outperform the market by a wide margin.
A price floor that is set above the equilibrium price
A) causes suppliers to lower their prices. B) is binding. C) is non-binding. D) creates a shortage.
Which of the following categories accounted for the largest percentage of total federal government expenditures in recent years?
a. Income security. b. National defense. c. Education and health. d. Interest on the national debt.