Which of the Following Correctly Describes a Wage-Price Spiral

question 63

Multiple Choice

Which of the following correctly describes a wage-price spiral?

• A) An increase in nominal wages causes inflation, and inflation causes workers to demand even higher wages in order to keep their real income constant. This cycle can repeat itself.
• B) An increase in real wages due to growth in worker productivity causes inflation, which in turn increases worker productivity.
• C) A decrease in prices causes workers to demand higher wages, which in turn puts additional downward pressure on prices.
• D) None of the above.

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Definitions:

Underapplied Overhead

Refers to the situation when the actual factory overhead costs are more than the overhead costs applied to a product based on the predetermined rate.

Overapplied Overhead

A situation where the estimated manufacturing overhead cost is more than the actual overhead incurred during a period.

Value Chain

A model that describes the full range of activities needed to create a product or service, from initial conception through the various phases of production to the final customer.

Service Entity

An organization or a part of an organization that provides services to customers or internal partners.