As the Proportion of Labor Contracts That Index Wages to Prices

question 4

Multiple Choice

As the proportion of labor contracts that index wages to prices declines,we would expect that

• A)a reduction in the unemployment rate will now have a smaller effect on inflation.
• B)the natural rate of unemployment will increase.
• C)the natural rate of unemployment will decrease.
• D)nominal wages will become more sensitive to changes in unemployment.

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Definitions:

Employer Contributions

Payments made by employers towards employee benefits, such as retirement plans, health insurance, and social security.

Employee Entitlements

Rights or benefits that are guaranteed to employees by law or company policy, such as leave entitlements, retirement benefits, and healthcare.

Inflation

The rate at which the general level of prices for goods and services is rising, leading to a decrease in purchasing power.

Health Care Costs

Expenses related to the provision of health care services, including the cost of treatments, medications, medical procedures, and hospital stays.