Workers at a local mining company are paid $25.60 per hour, and they have incorporated a 3 percent annual raise in their contracts to account for expected inflation
Explain how unexpected inflation of 5 percent will affect the real wage and the unemployment rate.
If actual inflation is 3%, a 3% increase in wages will allow workers to maintain their real wage. However, if inflation is higher than expected (5% instead of 3%), the 3% increase in wages will reduce the real wage, and firms will hire more workers than they had planned. As a result, unemployment will fall.
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The marginal benefit of a worker to a firm is the value of the extra output that results when
A) work is outsourced to a foreign country. B) workers get paid for working overtime. C) some workers are laid off and the remaining workers become more productive. D) an additional worker is hired.
LRE. Suppose there is an increase in SRAS. As wages eventually react to the new situation, what will happen? Wages will _____ and SRAS will shift ___
a. increase; right b. increase; left c. decrease; right d. decrease left
A person states that "a large public debt will bankrupt the U.S. government." An economist is likely to respond:
A. yes because this public debt will reduce our ability to borrow the necessary funds from foreign nations. B. yes because a large public debt means that the U.S. government will not be able to meet its financial obligations. C. no because the government can refinance the public debt by selling new bonds. D. no because most of the public debt is held by foreign nations.
A bowed outward production possibilities curve occurs when
A. resources are not scarce. B. additional units of output of one good necessitate greater reductions in the other good. C. there are surpluses in the goods being produced. D. opportunity costs are constant.