Which of the following statements refers to the wage-price spiral process?
(A) The salary of a worker fluctuates with the amount of sales he or she accomplishes per month.
(B) Employees only receive a raise when their purchasing power has been eroded by inflation.
(C) An employee loses his or her job, finds a position at another company, and is underemployed.
(D) A worker receives a raise, which increases costs for the employer.
Ans: (D) A worker receives a raise, which increases costs for the employer.
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As a firm attempts to increase its production, its long-run average costs eventually rise because of
A) the law of diminishing returns. B) diseconomies of scale. C) fixed capital. D) insufficient demand.
Society might argue that there are cases in which it is appropriate to resist price increases in situations where scarcity is serious. Included would be the case of
A. unrestrained monopoly that would otherwise succeed in extracting funds from the public. B. taxes imposed on products capriciously and inappropriately. C. rising prices falling so heavily on the poor that rationing becomes preferable. D. All of the responses are correct.
Unexpectedly high inflation ________ borrowers and ________ lenders.
A. helps; hurts B. hurts; hurts C. helps; helps D. hurts; helps
Most economists believe that there are positive externalities in education. One can conclude that a free market would fail to give the socially optimal outcome because the equilibrium:
A. price and quantity would be too high. B. price would be too low and quantity would be too high. C. price and quantity would be too low. D. price would be too high and quantity would be too low.