If Workers and Firms Expect That Inflation Will Be 5

question 125

Multiple Choice

If workers and firms expect that inflation will be 5 percent next year,and real wages are not changing over time,by how much will nominal wages increase?

• A)5 percent
• B)more than 5 percent
• C)less than 5 percent
• D)depends on actual inflation for next year

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Definitions:

Depreciation Expense

The systematic allocation of the depreciable amount of an asset over its useful life, representing wear and tear or obsolescence.

Profit on Sale-Leaseback

This refers to the gain a company realizes when it sells an asset and immediately leases it back from the buyer, thus continuing to use the asset without owning it.

Amortization

A process of gradually writing off the initial cost of an asset over a period.