If Rational Workers and Firms Know That the Federal Reserve

question 233

Multiple Choice

If rational workers and firms know that the Federal Reserve is following a contractionary monetary policy,they will expect inflation to ________ and will adjust wages so that the real wage ________.

• A)increase; remains unchanged
• B)decrease; remains unchanged
• C)decrease; increases
• D)increase; decreases

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Definitions:

Contrapositive

A logical statement obtained by negating and swapping the hypothesis and conclusion of a conditional statement.

Proposition

A statement or assertion that expresses a judgment or opinion; in logic, it is a declarative sentence that is either true or false.

Relationship

How two or more notions, entities, or persons have a bond between them, or the existence of such a bond.

Contradictories

Statements or propositions that are in direct opposition to each other, such that if one is true, the other must be false.