ECONOMICS
GDP
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Rising wages cause higher prices which has higher wages
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Income that does not increase even when prices go up
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A sustained drop in the price of goods
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A measurement that shows how the average cost of goods or services change over time
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Detailed explanation-1: -The spiral in wage price leads to an increase in labor costs, price rise of commodities, rise in wages, and ultimately inflation. Whenever there is a rise in wages due to the pressure of cost and demand upon the labor market, inflation results from the pressure impacting the goods markets.
Detailed explanation-2: -We define a wage-price spiral as an episode where at least three out of four consecutive quarters saw accelerating consumer prices and rising nominal wages. Perhaps surprisingly, only a small minority of such episodes were followed by sustained acceleration in wages and prices.
Detailed explanation-3: -A rise in the money wage rate makes the aggregate supply curve shift inward, meaning that the quantity supplied at any price level declines. A fall in the money wage rate makes the aggregate supply curve shift outward, meaning that the quantity supplied at any price level increases.
Detailed explanation-4: -The relationship between prices and wages. Wages growth is an important driver of inflation because wages are a large share of firms’ costs. If wages growth exceeds productivity growth and then firms raise prices to preserve margins and profitability, this can drive inflation higher.