An unanticipated deflation does all of the following except
A)redistributes wealth.
B)decreases the real wages of workers with long- term wage contracts.
C)lowers real GDP.
D)lowers employment.
E)redistributes income.

Question

Quizplus · Accepted Answer

In an unanticipated deflation, the overall price level falls unexpectedly, causing the real value of wages to increase. This means that workers with long-term wage contracts actually benefit from an unanticipated deflation, as their purchasing power increases. Therefore, option B is the incorrect statement. The other options are all correct effects of an unanticipated deflation.

An Unanticipated Deflation Does All of the Following Except