Employees at the hospital have negotiated a 3 percent increase in wages for the next year, based on their inflation expectations. If inflation is actually 5 percent over the next year, which of the following will occur?
A) Real wages for hospital employees will fall. B) The increase in inflation is expected.
C) Inflation will be 3 percent the following year. D) Unemployment of hospital employees will rise.
A
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Starting from long-run equilibrium, a large tax increase will result in a(n) ________ gap in the short-run and ________ inflation and ________ output in the long-run.
A. recessionary; lower; potential B. expansionary; lower; potential C. expansionary; higher; potential D. recessionary; lower; lower
The law of one price does not hold for
A) agricultural goods. B) tradeable goods. C) differentiated goods. D) goods whose production causes pollution.
Four possibilities are equally likely and have payoffs of $2, $4, $6, and $8 . The expected value is:
a. $5 b. $6 c. $7 d. $8
A shortage in the bread market can cause the price of bread to rise
Indicate whether the statement is true or false