Suppose the Economy Includes Two Distinct Groups of People: Wage

question 97

Multiple Choice

Suppose the economy includes two distinct groups of people: wage earners and goods sellers.If the price level increases by 50 percent and nominal wages remain unchanged,

• A) there will be no redistribution of purchasing power because all private wage earners in the U.S.economy receive indexed wages
• B) real wages will remain the same because nominal wages do not change
• C) there will be no redistribution of purchasing power because only changes in real income can change the distribution of income
• D) income will be redistributed from wage earners to goods sellers
• E) income will be redistributed from goods sellers to wage earners

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Definitions:

Invested Assets

Assets that are purchased or acquired with the expectation that they will generate income or increase in value over time.

Target Cost

The estimated price for a product or service that is determined by subtracting a desired profit margin from the competitive market price.

Profit Margin

The ratio or percentage of profit to sales, reflecting the efficiency with which a company or business unit generates income relative to its revenue.

Competition-Based Method

A method of price setting based on the price offered by competitors.