If Wages and Prices Were Fully Indexed

question 50

Multiple Choice

If wages and prices were fully indexed,

• A)there would be less inflation following an adverse supply shock
• B)inflation could always be perfectly anticipated
• C)inflation arising from money expansion could be prevented
• D)the economy would have difficulty adjusting to supply shocks since real wages could not adjust easily
• E)politicians would be more likely to fight inflation vigorously

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Definitions:

Necessary Reagents

Chemical substances or compounds that are required to initiate or drive a particular chemical reaction.

Crossed Claisen Condensation

A reaction between different esters or an ester and a carbonyl compound under basic conditions to form a β-keto ester or a β-diketone.

Methyl Benzoate

A compound consisting of a methoxy group (-OCH3) attached to a benzene ring substituting a hydrogen atom.

Cyclohexanone

A ketone with a six-membered ring structure, used as an important solvent and in the synthesis of nylon and other polymers.