Wage Contracts Are Often Set for Periods of Up to Three

question 30

Multiple Choice

Wage contracts are often set for periods of up to three years.As a result,fluctuations in aggregate demand and aggregate supply tend to

• A)cause changes in the amount of involuntary unemployment.
• B)cause greater inflexibility of wages.
• C)have no effect in labour markets until wages are renegotiated.
• D)clear the labour market.
• E)either increase or decrease the NAIRU.

---

Definitions:

Market Risk Premium

The incremental profit expected by an investor when they decide to hold a market portfolio with risk rather than secure, riskless assets.

Risk-Free Rate

The theoretical rate of return of an investment with zero risk, often represented by Treasury bills, serving as a benchmark for assessing the risk and return of other investments.

Good Economy

An economic state characterized by strong growth, low unemployment, and stable prices, reflecting overall health and prosperity.

Poor Economy

A situation characterized by low economic activity, high unemployment, and declining market conditions.