Author Question: Workers at a local mining company are paid 25.60 per hour, and they have incorporated a 3 percent ... (Read 89 times)

tiffannnnyyyyyy

  • Hero Member
  • *****
  • Posts: 512
Workers at a local mining company are paid 25.60 per hour, and they have incorporated a 3 percent annual raise in their contracts to account for expected inflation.
 
  Explain how unexpected inflation of 5 percent will affect the real wage and the unemployment rate.

Question 2

Refer to Table 9-2. Assume the market basket for the consumer price index has two products  bread and milk  with the following values in 2011 and 2016 for price and quantity: The Consumer Price Index for 2016 equals
 
  A) 118. B) 116. C) 86. D) 85.



Tonny

  • Sr. Member
  • ****
  • Posts: 341
Answer to Question 1

If actual inflation is 3, a 3 increase in wages will allow workers to maintain their real wage. However, if inflation is higher than expected (5 instead of 3), the 3 increase in wages will reduce the real wage, and firms will hire more workers than they had planned. As a result, unemployment will fall.

Answer to Question 2

B



Related Topics

Need homework help now?

Ask unlimited questions for free

Ask a Question
 

Did you know?

Increased intake of vitamin D has been shown to reduce fractures up to 25% in older people.

Did you know?

The highest suicide rate in the United States is among people ages 65 years and older. Almost 15% of people in this age group commit suicide every year.

Did you know?

Most fungi that pathogenically affect humans live in soil. If a person is not healthy, has an open wound, or is immunocompromised, a fungal infection can be very aggressive.

Did you know?

Signs and symptoms of a drug overdose include losing consciousness, fever or sweating, breathing problems, abnormal pulse, and changes in skin color.

Did you know?

Methicillin-resistant Staphylococcus aureus or MRSA was discovered in 1961 in the United Kingdom. It if often referred to as a superbug. MRSA infections cause more deaths in the United States every year than AIDS.

Methicilli ...

For a complete list of videos, visit our video library