Which of the Following Correctly Describes a Theory of Wage

question 37

Multiple Choice

Which of the following correctly describes a theory of wage behavior during the business cycle?

• A) Real Business Cycle theory holds that workers are relatively unresponsive to wage changes
• B) Classical theory holds that nominal wages are inflexible
• C) Keynesian theory holds that real wages may rise during recessions, preventing labor markets from clearing
• D) Rational expectations theory holds that workers continue to anticipate wage increases during recessions
• E) Marxist theory holds that unions cause recessions by keeping wages too high

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Definitions:

GDP Deflator

A parameter representing the price level of all new, home-grown, final goods and services in a nation's economy.

Real GDP

Real GDP, factoring in inflation to more accurately reflect the true scale of an economy and its development over periods.

GDP

GDP, an indicator of a nation's economic health, is the overall value of all products and services produced within a country during a given timeframe.

GDP

The total market value of all goods and services produced within a country in a specific period, a broad indicator of economic performance.