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melinoma86 melinoma86
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4 years ago
Explain what is meant by the "wage-price spiral." Does it always work in one direction?
Textbook 
Macroeconomics: Principles, Applications and Tools

Macroeconomics: Principles, Applications and Tools


Edition: 7th
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4 years ago
The wage-price spiral refers to the process by which changes in wages cause changes in prices which in turn cause changes in wages. As prices rise workers will demand higher wages; thus the spiral. If the economy had been producing at a level below full employment the process would work in reverse with falling wages causing falling prices causing falling wages.
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