Workers Resist Wage Decreases More Vigorously Than They Resist Wage

question 74

Multiple Choice

Workers resist wage decreases more vigorously than they resist wage increases.This phenomenon makes the short-run Phillips curve nonlinear-steeper when inflation is positive than when inflation is negative.Given this nonlinearity,which of the following statements are true?
I.A positive inflation target (say 2%) leads to less unemployment than does an inflation target of zero.
II.The NAIRU (noninflationary rate of unemployment) is increased.

• A) I is true; II is not.
• B) II is true; I is not.
• C) Both I and II are true.
• D) Neither I nor II is true.

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Definitions:

Downward-Sloping

A graphical representation showing a decline or decrease from left to right, often used to describe demand curves where price and quantity demanded move in opposite directions.

Government Tax

Monetary charges imposed by a government on individuals, corporations, and transactions to finance government spending and services.

Labor-Market Policies

Measures and regulations implemented to influence the operation and outcomes of the labor market, including job creation, unemployment insurance, and minimum wage laws.

Coordinates

Numerical values that determine the position of a point or object in a space, typically defined by x and y axes in a two-dimensional space, or x, y, and z in three-dimensional space.