For this question,assume that expectations of P and A are correct.Now suppose that there is a 1% increase in A.Given this information,which of the following will occur?
A)a 1% increase in the real wage and a reduction in the natural rate of unemployment
B)a 1% increase in the real wage and no change in the natural rate of unemployment
C)no change in the real wage and an increase in the natural rate of unemployment
D)no change in the real wage and a reduction in the natural rate of unemployment

Question

Quizplus · Accepted Answer

An increase in A, which typically represents productivity, leads to an increase in the real wage as firms can afford to pay workers more without raising prices. However, the natural rate of unemployment, which is determined by factors such as the labor market's structure and policies, does not change with short-term productivity shifts.

For This Question,assume That Expectations of P and a Are