Workers and Firms Both Expect That Prices Will Be 3

question 275

Multiple Choice

Workers and firms both expect that prices will be 3% 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 3%.
• C)the short-run aggregate supply curve will shift to the left as wages increase.
• D)aggregate demand will increase by 3%.

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Definitions:

Externality

An externality is a consequence of an economic activity experienced by unrelated third parties; it can be either positive (beneficial) or negative (harmful).

Exotic Fish

Fish species that are not native to a specific location, often kept in aquariums or introduced to new environments where they can sometimes become invasive.

Common Resources

Natural or man-made resources that are not excludable but are rival in consumption, such as fish in the sea or public parks.

Excludable

A characteristic of a good or service that means it can be prevented from being used by people who have not paid for it.