Workers and Firms Both Expect That Prices Will Be 4

question 53

Multiple Choice

Workers and firms both expect that prices will be 4% higher next year than they are this year. As a result:

• A)workers will be willing to take lower wages next year.
• B)the purchasing power of wages will rise if wages increase by 4%.
• C)the short-run aggregate supply curve will shift to the left as wages increase.
• D)aggregate demand will increase by 4%.

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Definitions:

Marginal Product

The additional output that results from using one more unit of a particular input, while holding other inputs constant.

Average Product

The output produced per unit of input, calculated by dividing total output by the number of units of a specific input.

Marginal Product

The boost in output stemming from an increment in input by one unit.

Wage

The payment received by workers for their labor, typically expressed as an amount per hour or per year.