Which best describes a wage-price spiral?

The Wage-price Spiral and Inflation

The wage-price spiral is an economic term that describes the phenomenon of price increases as a result of higher wages. When workers receive a wage hike, they demand more goods and services and this, in turn, causes prices to rise.

Also What is a wage-price spiral quizlet?

Wage Price Spiral. Definition of ‘Wage-Price Spiral’ A macroeconomic theory to explain the cause-and-effect relationship between rising wages and rising prices, or inflation. The wage-price sprial suggests that rising wages increase disposable income, thus raising the demand for goods and causing prices to rise.

Subsequently, Which best describes a wage-price spiral quizlet? Which best describes a wage-price spiral? Increased wages lead to increased prices, which lead to a demand for higher wages.

Which of the following describes the logic of a wage-price spiral? Which of the following describes the logic of a wage-price spiral? Inflation causes workers to demand higher nominal wages, which causes businesses to further raise their prices, which causes workers to seek still higher nominal wages, etc.

Under what conditions is a wage-price spiral most likely to occur?

12 – A wage-price spiral is most likely to occur when an economy moves into a recession.

What are the stages in a wage-price spiral quizlet?

What are the stages in a wage-price spiral? Increase in wages, wage increases drive up population costs, producers raise price to pay for higher production costs, workers demand higher wages to pay higher prices. What are the three effects of inflation?

What kind of inflation is the wage-price spiral An example of quizlet?

Cost-push inflation can lead to a spiral of ever-higher prices. That is, one increase in cost leads to an increase in prices, which leads to another increase in costs, and so on and on. The process by which rising wages cause higher prices, and high prices cause higher wages, is known as the wage-price spiral.

What are the 3 costs of inflation?

The Costs of Inflation. The costs of inflation include menu costs, shoe leather costs, loss of purchasing power, and the redistribution of wealth.

What causes a wage price spiral and how does it affect the economy quizlet?

Cost-push inflation can lead to a spiral of ever-higher prices. That is, one increase in cost leads to an increase in prices, which leads to another increase in costs, and so on and on. The process by which rising wages cause higher prices, and high prices cause higher wages, is known as the wage-price spiral.

Which of the following best describes the consumer price index CPI )? Quizlet?

Which of the following statements best describes the consumer price index (CPI)? It measures the change in weighted-average price over time in a consumer market basket of goods and services that the average person buys each month.

What is the poverty threshold quizlet?

Terms in this set (11)

The poverty threshold is the income level below which income is insufficient to support a family or household. … The poverty rate is the percentage of people who live in households with income below the poverty level.

What causes wage inflation?

Companies charge more for their goods to pay higher wages, and the higher wages also increase the price of goods in the broader market. … The percentage increase of the wages and prices and their overall effect on the market are key factors driving inflation in the economy.

What is wage price flexibility?

Wages are said to be flexible when they respond to changes in supply and demand and lead to the market clearing wage being set. It implies that the wage will be set by the Marginal Revenue Product of labour and marginal cost of labour. Any change in supply and demand for labour will lead to a change in the wage rate.

What causes a wage-price spiral and how does it affect the economy quizlet?

Cost-push inflation can lead to a spiral of ever-higher prices. That is, one increase in cost leads to an increase in prices, which leads to another increase in costs, and so on and on. The process by which rising wages cause higher prices, and high prices cause higher wages, is known as the wage-price spiral.

What are the stages of wage-price spiral?

What are the stages in a wage-price spiral? Increase in wages, wage increases drive up population costs, producers raise price to pay for higher production costs, workers demand higher wages to pay higher prices.

What are the stages in a wage price spiral slader?

Employees receive a salary increase. The salary increase drives up the costs of production. Companies raise prices to pay for higher costs of production. Employees demand a salary increase to pay for higher product prices.

What are the four effects of inflation?

Rising prices, known as inflation, impact the cost of living, the cost of doing business, borrowing money, mortgages, corporate, and government bond yields, and every other facet of the economy. Inflation can be both beneficial to economic recovery and, in some cases, negative.

What are the three effects of inflation give an example of each?

Three effects of inflation are eroded purchasing power, like how a dollar will not buy you as much chewing gum as it used to, eroded income, like when people’s wages do not rise with inflation, and lower returns from interest, like when a bank’s interest rate matches the inflation rate, savers break even.

What is cost-push inflation example?

The most common example of cost-push inflation occurs in the energy sector – oil and natural gas prices. You and pretty much everyone else need a certain amount of gasoline to fuel your car or natural gas to heat your home. Refineries need a certain amount of crude oil to create gasoline and other fuels.

What is demand-pull inflation with examples?

Consumers have more discretionary income to spend on goods and services. When that increases faster than supply, it creates inflation. For example, tax breaks for mortgage interest rates increased demand for housing.

What type of inflation occurs when producers raise prices in order to meet increased costs?

Ch 13 Economic Challenges

What are the various costs of inflation?

The inflation is considered to be bad for an economy mainly because it destroys the purchasing power of the money. When Price rise, each Rupee that you had will but less quantity of goods and services. Therefore, inflation destroys the real income of the people and makes them worse off.

What are the real costs of inflation?

There are many costs associated with inflation; the volatility and uncertainty can lead to lower levels of investment and lower economic growth. For individuals, inflation can lead to a fall in the value of their savings and redistribute income in society from savers to lenders and those with assets.

What are the 5 causes of inflation?

Here are the major causes of inflation:

• Demand-pull inflation. Demand-pull inflation happens when the demand for certain goods and services is greater than the economy’s ability to meet those demands. …
• Cost-push inflation. …
• Increased money supply. …
• Devaluation. …
• Rising wages. …
• Policies and regulations.