Workers in Country a Receive an Increase in Wages of 10

question 31

Multiple Choice

Workers in country A receive an increase in wages of 10 percent at the same time the inflation rate in country A is 8 percent.Workers in country B receive an increase in wages of 3 percent and the inflation rate in country B is 1 percent.In which country are workers better off?

• A)Country A because their real wages rise by 18 percent.
• B)Country A because their real wages rise by 10 percent.
• C)Country B because the inflation rate is lower.
• D)Neither country because the increase in real wages is the same.

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Definitions:

Information Omission

Occurs when crucial details are left out of a communication, potentially leading to misinterpretation or a lack of understanding.

Adverse Selection

A situation where asymmetric information leads to the selection of undesirable alternatives in transactions.

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A policy purchased by vehicle owners to mitigate costs associated with getting into an auto accident.

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Measures taken in advance to prevent harm or reduce risk.