1. Wages and prices will increase when actual output exceeds potential. __________(True/False)
2. The short run in macroeconomics is the time period over which __________do not adjust to economic conditions.
3. According to the logic of the wage price spiral, an increase in wages leads to a(n) __________ in __________, which in turn leads to a(n) __________ in __________.
4. In the long run, the level of GDP is determined by demand. __________ (True/False)
5. Cost of Living Adjustments and the Wage Price Spiral. Suppose organized labor has successfully bargained for cost of living increases for its workers. That is, when prices rise as measured by the CPI wages are automatically adjusted by the same percentage. Would this make the economy more or less likely to experience a wage price spiral?
6. Unemployment and Wage Price Changes. If the natural rate of unemployment is 6 percent and the actual rate of unemployment is 7 percent, how will wages and prices change? Suppose the natural rate was 7 percent?