How will firms react to rising output price levels? What reactions can they expect from their employees and suppliers over time?
Firms have an incentive to increase real output if the price of the goods they are selling is rising faster than the cost of their inputs. Suppliers and workers will begin to experience diminished purchasing power. As a result of this diminished purchasing power they will begin to adjust their demands for higher wages and higher prices for inputs.
You might also like to view...
In the United States, the percentage of part-time workers who are part time for noneconomic reasons
A) has fallen by almost one half since 1980. B) does not fluctuate much with the business cycle. C) rises during an expansionary period and falls during a recessionary period. D) has averaged about 33 percent of all workers. E) has increased in most years since 1980.
A decrease in the demand for loanable funds and a leftward shift of the demand for loanable funds curve results from
A) an increase in the real interest rate. B) technological improvements. C) tax cuts. D) decreases in the expected profit.