As the Proportion of Labor Contracts That Index Wages to Prices

question 4

Multiple Choice

As the proportion of labor contracts that index wages to prices declines,we would expect that

• A)a reduction in the unemployment rate will now have a smaller effect on inflation.
• B)the natural rate of unemployment will increase.
• C)the natural rate of unemployment will decrease.
• D)nominal wages will become more sensitive to changes in unemployment.

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