Use the following figure to answer the questions : Figure 7.3 :
-According to Figure 7.3,prices and wages were rising,so
A)Sellers of output were better off than wage earners.
B)Everyone must have been worse off since the price level rose faster than incomes.
C)There were no redistributive effects of inflation.
D)The economy was experiencing stagflation.

Question

Use the following figure to answer the questions : Figure 7.3 : 
-According to Figure 7.3,prices and wages were rising,so
A)Sellers of output were better off than wage earners. 
B)Everyone must have been worse off since the price level rose faster than incomes. 
C)There were no redistributive effects of inflation. 
D)The economy was experiencing stagflation.

Quizplus · Accepted Answer

If both prices and wages are rising, then sellers of output (i.e. producers or businesses) are better off because they are receiving higher prices for their goods and services. Wage earners may also benefit somewhat from higher wages, but their purchasing power may be eroded if prices are rising faster than their incomes. Therefore, option A is the best choice. Option B is incorrect because it assumes that incomes did not rise at all, which is not specified in the figure. Option C is unlikely because inflation typically has redistributive effects, even if they are not equal for everyone. Option D is not supported by the limited information provided.

Use the Following Figure to Answer the Questions : Figure