Workers and Firms Both Expect That Prices Will Be 3

question 275

Multiple Choice

Workers and firms both expect that prices will be 3% higher next year than they are this year.As a result

• A)workers will be willing to take lower wages next year.
• B)the purchasing power of wages will rise if wages increase by 3%.
• C)the short-run aggregate supply curve will shift to the left as wages increase.
• D)aggregate demand will increase by 3%.

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Definitions:

Deposit Insurance

A protection scheme for bank depositors that guarantees the safety of deposited funds up to a certain limit in the event of a bank failure.

Financial Risk

The possibility of losing money on an investment or business venture.

Open Market Operations

Technique in which the Fed buys or sells government bonds to affect the supply of money and credit.

Reserve Requirements

Regulations set by central banks determining the minimum amount of reserves that must be held by a commercial bank, used as a tool in monetary policy.