Suppose You Are Forced to Take a Pay Cut of 5

question 100

Multiple Choice

Suppose you are forced to take a pay cut of 5% when the economy is experiencing overall deflation of 5%.If in response to your pay cut you also reduce your consumption by 5%,then economists would say:

• A) you made a rational decision.
• B) you are exhibiting money illusion.
• C) your real wage decreased by 5%.
• D) the quantity theory of money held.

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Definitions:

Uncertainty Avoidance

A cultural dimension that describes the extent to which a society tolerates ambiguity and uncertainty.

Cultural Preference

The tendency of individuals or groups to favor certain beliefs, practices, or items because of cultural backgrounds.

Structured Situations

Scenarios or environments where the procedures, rules, and objectives are clearly defined and organized.

Exporting

The activity of selling goods or services produced in one country to buyers in other countries.