Assume contracts between workers and employers that call for an increase in the wage rate of 5 percent are based on an expected inflation rate of 3 percent. Should inflation actually be 6 percent, then:
A. Nominal wages fall by 5 percent
B. Real wages fall by 6 percent
C. Nominal wages fall by 1 percent
D. Real wages fall by 1 percent
D. Real wages fall by 1 percent
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If a freeze destroys oranges before they are harvested, the equilibrium price of an orange ________ and the equilibrium quantity ________
A) rises; increases B) rises; decreases C) falls; increases D) falls; decreases E) does not change; decreases
Zero economic profit means that the firm’s owners receive no compensation for their investment.
Answer the following statement true (T) or false (F)
In behavioral economics, the endowment effect refers to the fact that
A) most people believe that most wealthy people inherit their wealth. B) many people would be indifferent between being endowed with money or knowledge. C) many people place a higher value on what they own than the same item they are considering purchasing. D) most people respond to tax incentives to provide an endowment for their children.
Suppose that a tax is placed on a particular good. If the buyers end up bearing most of the tax burden, this indicates that the
a. demand is more inelastic than the supply. b. supply is more inelastic than the demand. c. government has required that buyers remit the tax payments. d. government has required that buyers remit the tax payments.