If Workers Always See Inflation Coming, and If They Demand

question 146

Multiple Choice

If workers always see inflation coming, and if they demand wage increases in advance so that inflation does not erode real wages, then the economy's aggregate supply curve on the AD-AS diagram will

• A)be a vertical line corresponding to potential GDP.
• B)be a horizontal line corresponding to potential GDP.
• C)slope downward.
• D)slope upward.

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Definitions:

Physiological

Pertaining to the branch of biology that deals with the normal functions of living organisms and their parts.

Self-actualization

The realization or fulfillment of one's talents and potentialities, considered as a drive or need present in everyone.

Belonging

A sense of acceptance and support within a group or environment, often leading to feelings of security and community.

Maslow's Hierarchy

A theory in psychology proposed by Abraham Maslow, which suggests that people are motivated to fulfill basic needs before moving on to other, more advanced needs.