How is perception about the future inflation rate likely to affect labour markets?
A) the higher the anticipated inflation rate, the more workers will ask for in wages, and the more firms will agree to pay to workers
B) the higher the anticipated inflation rate, the more workers will ask for in wages, and the less firms will agree to pay to workers
C) the higher the anticipated inflation rate, the less workers will ask for in wages, and the less firms will agree to pay to workers
D) the higher the anticipated inflation rate, the higher the real wage increases firms will offer to their workers

Question

How is perception about the future inflation rate likely to affect labour markets?  
A) the higher the anticipated inflation rate, the more workers will ask for in wages, and the more firms will agree to pay to workers 
B) the higher the anticipated inflation rate, the more workers will ask for in wages, and the less firms will agree to pay to workers 
C) the higher the anticipated inflation rate, the less workers will ask for in wages, and the less firms will agree to pay to workers 
D) the higher the anticipated inflation rate, the higher the real wage increases firms will offer to their workers

Quizplus · Accepted Answer

When workers anticipate higher inflation in the future, they tend to ask for higher wages to maintain their purchasing power. Firms, understanding the need to retain workers and acknowledging the inflationary environment, are more likely to agree to these wage increases.

How Is Perception About the Future Inflation Rate Likely to Affect