When considering the effects of widespread wage indexing
A)one has to distinguish between demand shocks and supply shocks
B)one always comes to the conclusion that they are ill-suited to protect against the loss of purchasing power
C)one quickly realizes the benefits arising from less real wage rate rigidity
D)one realizes that it is very hard to tie nominal wages to a specific price index
E)none of the above

Question

Quizplus · Accepted Answer

Wage indexing can have different effects depending on whether the economy is experiencing demand shocks or supply shocks. It can help maintain purchasing power during demand shocks but may not be as effective during supply shocks.

When Considering the Effects of Widespread Wage Indexing