Suppose the city is undergoing severe ination. Specifically, both goods prices have risen by 10%. What percentage of a raise in the wage rate should Alex request from her boss, for her to maintain the same level of maximized utility without having to work more hours? Use one of the properties of the indirect utility function to prove your point.

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To maintain the same level of utility purchasing power in the face of inflation Alex should request a wage increase equal to the inflation rate which ... View the full answer