Author Question: Alejandro expects the price level to rise from 105 this year to 108 next year. If the price level ... (Read 103 times)

theo · **on:** Jun 29, 2018

Alejandro expects the price level to rise from 105 this year to 108 next year. If the price level rises to 110 next year instead of 108, which of the following will occur?

A) Alejandro's real wage rises.
B) Alejandro's real wage remains unchanged.
C) Alejandro's real wage may rise or fall, depending on the unemployment rate.
D) Alejandro's real wage falls.

Question 2

Explain how market economies are generally better able to achieve technological progress than are centrally planned economies.

What will be an ideal response?

bob · **Reply #1 on:** Jun 29, 2018

Answer to Question 1

D

Answer to Question 2

In a centrally planned economy, decisions regarding the allocation of resources are made by government employees paid a salary, not by independent entrepreneurs whose own finances are at stake. Independent entrepreneurs make choices for the use of resources based on the expected profitability of various projects. This drive for profit provides an incentive for technological change that centrally planned economies are unable to duplicate. The result is that technological progress is more likely in market economies than in centrally planned economies.