The Table Below Shows Data for Five Economies of Similar

question 57

Multiple Choice

The table below shows data for five economies of similar size.Real GDP is measured in billions of dollars.Assume that potential output for each economy is $340 billion. TABLE 24-1 Refer to Table 24-1.Which of the following statements explains why wages are rising in Economy E?

• A)The inflationary gap generates lower profits for firms because workers are demanding higher wages.
• B)The inflationary gap generates excess demand for labour,which causes wages to rise.
• C)The aggregate supply curve is shifting to the right,which is causing wages to rise.
• D)The aggregate demand curve is shifting to the right,causing wages to rise.
• E)Potential output is rising,putting upward pressure on wages.

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Definitions:

Core Labor Standards

Fundamental principles and rights at work established by the International Labour Organization, including freedom from forced labor, child labor, discrimination, and the right to collective bargaining.

Nontariff Trade Barrier

Restrictive regulations and policies other than tariffs that countries use to control the amount of trade across their borders, including quotas, embargoes, or standards.

Domestic Subsidies

Financial aid provided by a government to support a domestic industry or sector, reducing the cost of production or services for national companies.

Import Licensing

A government policy requiring businesses to obtain official permission before importing certain goods, often used to control the amount of goods entering a country.