Economists Who Believe That Long-Run Inflationary Bias Will Continue Base

Multiple Choice

Economists who believe that long-run inflationary bias will continue base their belief on the following factors:

A) Prices and wages tend to rise during periods of boom in a competitive economy; this tendency is reinforced by wage contracts that provide escalator clauses to keep wages in line with prices and by wage increases that are sometimes greater than increases in productivity.
B) During recessions, prices tend to remain stable rather than decrease because major unions have long-run contracts calling for annual wage increases no matter what economic conditions are at the time.
C) The tendency of large corporations to rely on non-price competition (advertising, and style and color changes) and to reduce output rather than cut prices also keeps prices stable.
D) If prices decline drastically in a field, the government is likely to step in with programs to help take excess supplies off the market.
E) all of the above are correct