Multiple Choice
Assume that expectations of P and A are correct. Now suppose that there is a 1.6% increase in A. Given this information, which of the following will occur?
A) A 1.6% increase in the real wage and an increase in the natural rate of unemployment.
B) No change in the real wage and an increase in the natural rate of unemployment.
C) A 1.6% increase in the real wage and no change in the natural rate of unemployment.
D) No change in the real wage and a decrease in the natural rate of unemployment.
E) A 1.6% increase in the real wage and a decrease in the natural rate of unemployment.
Correct Answer:
Verified
Correct Answer:
Verified
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