Suppose the following equation holds for an economy at every time : . That is, the price of output is a fixed markup over unit labour cost. Let be the inflation rate, the wage inflation rate, and the rate of growth in labour productivity (labour productivity ). Which of the following is true?
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Suppose the following equation holds for an economy at every time t: Pₜ=(1+a)WₜNₜ/Yₜ. That is, the price of output is a fixed markup over unit labour cost. Let π be the inflation rate, w the wage inflation rate, and λ the rate of growth in labour productivity (labour productivity =Yₜ/Nₜ). Which of the following is true? (A) w=π-λ (B) π=w+λ (C) π=w-λ (D) w=λ-π
Also written as: Suppose the following equation holds for an economy at every time t: P_t=(1+a)W_tN_t/Y_t. That is, the price of output is a fixed markup over unit labour cost. Let pi be the inflation rate, w the wage inflation rate, and lambda the rate of growth in labour productivity (labour productivity =Y_t/N_t). Which of the following is true?
Inflation, unemployment and the Phillips curve has come up 106 times in 7 exams since 2006.
This question is on Causes and types of inflation, part of Inflation, unemployment and the Phillips curve in Macroeconomics.
What drives inflation: demand, costs, structure and money creation.
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Question from the DSE 2011 paper. Solutions are TestStop's own. Not affiliated with or endorsed by any examination authority.