General Juan Peron, the former dictator of Argentina, once said of the labor market in his country, "Prices have gone up the elevator, and wages have had to use the stairs."

a. In this situation, what was happening to real wages in Argentina?

b. Was unemployment likely to have been relatively high or relatively low?

A. The real wages in the economy had been lower than the expected real wages.

B. Unemployment was likely to have been relatively high.

Explanation:

What it means for prices to go up the elevator, and wages having to use the stairs is that the prices are rising much faster than the rise in nominal wages.

What happens in this case is that real wages would fall. From the passage given above, it can be concluded that General Juan Peron wants to make it known to everyone that the actual inflation has been higher than the real inflation while the actual real wages in the economy have been lower than the expected real wages.

Now, when such an incidence takes place, many firms will be able to employ more workers than they had already planned to employ.

Hence, the unemployment rate will fall.

Therefore, unemployment was likely to have been relatively high.