Recently a Labour Union Argued That the Standard of Living

question 9

Multiple Choice

Recently a labour union argued that the standard of living of its members was falling.A critic of the union argued that this could not possibly be true,because the union had been acquiring increases in the nominal incomes of its members through collective bargaining.Is the critic correct?

• A)Yes, because when you have an increase in nominal income, your standard of living automatically increases.
• B)No, because real income may fall if price increases are proportionally greater than the increases in nominal income.
• C)No, because real income may fall if price increases are proportionally less than the increases in nominal income.
• D)Yes, because real income may fall if price increases are proportionally less than the increases in nominal income.
• E)Yes, because real income may fall if price increases are proportionally greater than the increases in nominal income.

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Definitions:

Lock-up Restrictions

Contractual limitations on the sale of securities, typically imposed on company insiders following an initial public offering.

Less Liquid

A term describing an asset that cannot be quickly sold or converted into cash without significant loss of value.

More Liquid

Describes an asset or market that allows for assets to be bought or sold quickly without significantly affecting the asset's price.

Front-end Commission

A fee paid when purchasing shares of a mutual fund, upfront, which reduces the amount invested from the start.