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Wage-price Spirals: Theory vs Reality

"Wage-price spirals are far scarier in theory than in practice," from The Economist, scrutinises the concept of wage-price spirals and their actual impact on inflation. The article argues that wage-price spirals are rarer and less threatening than often portrayed. Drawing on historical data and recent studies, it highlights that while there is a correlation between wages and inflation, it's mostly unidirectional: Wage growth usually follows inflation rather than causing it, and other factors like commodity prices and supply shortages are more influential in driving inflation.

The article is fairly accessible with some technical economic language, and it can be especially useful when teaching topics of inflation, wage-price spirals, and labour markets. It would work well as extra reading or to demonstrate how 'Theory vs Reality' can be a useful form of evaluation.


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