Suppose the Economy Includes Two Distinct Groups of People: Wage

question 12

Multiple Choice

Suppose the economy includes two distinct groups of people: wage earners and goods sellers.If the price level falls by 10 percent and nominal wages remain unchanged,

• A) there will be no redistribution of purchasing power because all wage earners in the U.S.economy receive indexed wages
• B) income will be redistributed from wage earners to goods sellers
• C) income will be redistributed from goods sellers to wage earners
• D) real wages will fall by 10 percent
• E) real wages will remain unchanged

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Definitions:

Indirect Expenses

Costs that are not directly traceable to a specific product or operation, such as utilities or administrative salaries.

Secondary Equity Offering

The issuance of new stock for sale to the public by a company that has already undergone an initial public offering (IPO).

Underpriced

A situation where an asset is selling for less than its perceived or intrinsic value.