For this question,assume that expectations of productivity are slow to adjust.Further assume that A had been increasing by 2% a year.Now suppose that A increases by 5% in period t.This increase in productivity growth will cause
A)the real wage to rise and no change in the natural rate of unemployment.
B)the WS relation to shift up more than the PS relation.
C)the natural rate of unemployment to fall.
D)the real wage to fall.

Question

Quizplus · Accepted Answer

An increase in productivity growth will increase output and lower costs, leading to an increase in firms' willingness to hire workers and a decrease in the natural rate of unemployment. This will not directly affect the real wage or cause a shift in either the WS or PS relation.

For This Question,assume That Expectations of Productivity Are Slow to Adjust.Further