ECO 203 Week 4

ECO 203 Week 4 Quiz

Discussion Questions

Your boss offers you a wage increase of 10 percent. Is it possible that you are worse off with the wage increase than you were before? Explain your answer using proper economic terms and analysis.

On pg. 255 in your text, The Economics in Practice describes the increase in food prices around the world in 2008. Since food, in large measure, affects the real income of households, increasing prices will eventually push up wages and have an impact on the aggregate supply curve. Central banks were very worried about the prospects for inflation becoming generalized. To stop inflation, what would the Fed be likely to do? What are the consequences for the economy? Specifically, what would be the effects on employment and unemployment given the actions taken by the Fed?