Multiple choice

The share of labour in the GNP decreases under inflation because

  1. wages lag prices

  2. prices lag wages

  3. profits lag prices

  4. prices lag profits

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A Correct answer
Explanation

During inflation, wages typically increase more slowly than prices due to sticky wage theory and contract rigidities. When wages lag behind rising prices, labor's share of national income decreases relative to other factors like capital and profits.

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