If the Anticipated Rate of Inflation Is 5% and Workers

question 21

Multiple Choice

If the anticipated rate of inflation is 5% and workers agree to a wage increase of 4%, if the anticipated rate occurs, then nominal wages will:

• A)fall by 1%.
• B)rise by 4%.
• C)rise by 5%.
• D)fall by 5%.

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Definitions:

Percentage Change

A mathematical calculation that shows how much a quantity has increased or decreased in comparison to its previous value, expressed as a percentage.

Real GDP

measures the value of all final goods and services produced within a country's borders in a given time period, adjusted for inflation.

GDP Measures

Various methods of calculating the Gross Domestic Product, such as the expenditure approach, income approach, and production (or output) approach.

GDP Deflator

An evaluation system for the cost of all new, nationally generated, final goods and services within an economic context.