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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