If Workers and Firms Expect That Inflation Will Be 3

question 80

Multiple Choice

If workers and firms expect that inflation will be 3 percent next year, and real wages are not changing over time, by how much will nominal wages increase?

• A)3 percent
• B)more than 3 percent
• C)less than 3 percent
• D)the real wage rate divided by the expected inflation rate
• E)depends on actual inflation for next year

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Definitions:

Accounts Receivable

The financial obligations customers hold towards a company for products or services that have been served or benefited from, yet are unpaid.

Full Capacity

The maximum level of output that a company can sustain over a long period without increasing maintenance costs or causing wear and tear on its production assets.

Fixed Assets

Long-term tangible assets held for business use and not expected to be converted to cash in the upcoming fiscal year, such as buildings, machinery, and equipment.

Full Capacity

The maximum level of output that a company can sustain over a long period without increasing its production resources or incurring excessive stress on its production processes.