Suppose Inflation Is Expected to Be 5 Percent Next Year

question 62

Multiple Choice

Suppose inflation is expected to be 5 percent next year, and you and your employer agree to a 6 percent increase in your nominal, or monetary, wage. If inflation turns out to be 7%, what is your real wage increase?

• A) 1 percent
• B) -1 percent
• C) 0 percent
• D) -5 percent
• E) 6 percent

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Definitions:

Logistic Regression Model

A statistical method used for analyzing a dataset in which there are one or more independent variables that determine an outcome. The outcome is measured with a dichotomous variable (where there are only two possible outcomes).

Indicator Variable

A variable, usually binary, used to represent the presence or absence of a categorical effect in regression models.

Groceries

Consumer goods, especially food and household items, sold by a grocer.

Log Odds

The logarithm of the odds ratio, used in logistic regression to describe the relationship between a binary dependent variable and one or more independent variables.