Suppose in Country X, anticipating high inflation in the economy, wages of workers are increased in the beginning of a financial year. However, prices remain unchanged during the year. Everything else remaining constant, which of the following will be observed in this economy?
a. The cost of labor, that is the real wage will decline
b. The current profits of the firm will rise
c. Aggregate supply in the economy will increase
d. Annual production in the economy will remain unaffected
e. The aggregate supply curve will move to the left
Question 2
I woke up earlier today to beat other fishermen to the fish and yet I caught the same number of fish at 5 a.m. as I did at noon. Which of the following best explains this occurrence?
a. Many other fishermen also believe that they can catch a greater quantity of fish if they arrive earlier at the fishing area. So the area is crowded early in the day.
b. The fish do not care when they eat, so they are likely to bite on the bait at any time during the day.
c. The catching of fish is mostly luck, so timing is not important.
d. The early bird catches the worm.
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