If workers push for wages that are beyond what productivity gains can justify ________.
A)a temporary negative supply shock ensues driving up prices
B)a negative output gap ensues which will lead to higher unemployment if the Federal Reserve does not act
C)and the Federal Reserve eases monetary policy aimed at increasing aggregate demand to counter the negative supply shock,a price-wage spiral could ensue
D)all of the above
E)none of the above

Question

Quizplus · Accepted Answer

When workers push for wages beyond what productivity gains justify, it can lead to a temporary negative supply shock as businesses face higher costs, potentially leading to higher prices. This situation can also result in a negative output gap, where actual output is less than potential output, potentially increasing unemployment if not addressed by policy measures such as those by the Federal Reserve. If the Federal Reserve eases monetary policy to increase aggregate demand in response to the negative supply shock, it could lead to a price-wage spiral, where wages and prices continuously push each other higher. Therefore, all of the given scenarios are possible outcomes.

If Workers Push for Wages That Are Beyond What Productivity