Wages, Inflation and the Labor Market
The revival of the approach of the Classics has resulted in a multiplier which implies that an increase in the real wage will increase employment. This requires a close examination of the labor market. But the real wage is a composite construct — it is the money wage divided by the money price of consumer goods. These money variables can move independently of one another, and they do in inflationary processes. We must therefore explore inflation as a wage—price spiral, in which money wages and prices, moving at different rates, change distribution.
KeywordsLabor Supply Real Wage Consumer Good Capital Good Excess Demand
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