If Overall Labor Productivity Is Increasing at an Average Rate

question 28

Multiple Choice

If overall labor productivity is increasing at an average rate of 3 percent per year but by only
1 percent per year in the shoe manufacturing industry,then under the Kennedy-Johnson guidelines,wages of shoe workers should increase by ________ percent per year; prices of
Shoes should ________.

• A) 1; not change
• B) 1; increase by 1 percent per year
• C) 3; increase by 2 percent per year
• D) 3; not change
• E) 3; decrease by 2 percent per year

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Definitions:

High Variance

Refers to a wide range of outcomes or values in a set of data, indicating a high level of volatility or risk.

M2 Measure

A broad measure of a country's money supply that includes cash, checking deposits, and easily convertible near money.

Modigliani and Miller

Two economists who introduced groundbreaking theories on the irrelevance of capital structure for a company's value and the dividend policy irrelevance in an ideal market.

Total Excess

The amount by which the total returns on an investment exceed the benchmark or guaranteed returns.