Assume that workers have perfect information about changes in inflation.Which of the following statements is true in this context?
A)Wage rates will not adjust immediately to the price level on account of the fixed contracts.
B)The aggregate supply curve of the economy will become perfectly elastic.
C)The aggregate supply curve will shift to the right.
D)Nominal wage rates will always exceed the real wage rate.
E)The economy will continue to produce at the potential level of real GDP.

Question

Quizplus · Accepted Answer

With perfect information about inflation, workers can adjust their wage demands accordingly, allowing the economy to maintain production at its potential level of real GDP.

Assume That Workers Have Perfect Information About Changes in Inflation