Read: "The economist argued that rising wages do not always cause inflation; much depends on whether productivity rises at the same pace." Which assumption underlies this argument?
Answer and explanation
Correct answer: D. Output per worker can offset the cost of higher wages
- Step 1: If output per worker grows, higher wages need not raise prices. Answer: Output per worker can offset the cost of higher wages. Why not the others: Wages are unrelated to the cost of producing goods, Inflation is always caused by government spending and Productivity gains always lead to higher prices for consumers don't fit.
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