Workers and Firms Both Expect That Prices Will Be 2

question 124

Multiple Choice

Workers and firms both expect that prices will be 2.5% higher next year than they are this year.As a result

• A)workers will be willing to take lower wages next year,but not lower than a 2.5 percent decrease.
• B)the purchasing power of wages will rise if wages increase by 2.5%.
• C)the short-run aggregate supply curve will shift to the left as wages increase.
• D)aggregate demand will increase by 2.5%.

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Definitions:

Market Saturated

A situation in a market where the volume of a product or service has reached its maximum capacity, limiting the opportunity for new growth or expansion.

Thorstein Veblen

An American economist and sociologist known for his theory of the leisure class and criticisms of capitalism.

Milton Friedman

An influential American economist known for his strong advocacy of free-market capitalism and for his role in the Chicago School of Economics.

John Maynard Keynes

A British economist whose theories on the importance of government intervention in economies during downturns led to the development of Keynesian economics.