Gretchen Expects the Price Level to Rise from 104 This

question 117

Multiple Choice

Gretchen expects the price level to rise from 104 this year to 108 next year, and she is able to incorporate these expectations into her wage contract.If the price level rises to 106 next year instead of 108, which of the following will occur?

• A)Gretchen's real wage will be unchanged.
• B)Gretchen's real wage will fall.
• C)Gretchen's real wage will rise.
• D)Gretchen's real wage may rise or fall, depending on the unemployment rate.
• E)Gretchen is much less likely to become unemployed.

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Definitions:

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