What was Ricardo's theory on profits?
As real wages increase, real profits stay the same
As real wages increase, real profits increase
As real wages increase, real profits decrease
As real wages decrease, real profits increase
Answer
Real profits diminish as real wages rise, according to Ricardo's theory of profits. This inverse relationship arises as workers' wages claim a larger portion of an economy's output, leaving less surplus value available for business owners. In essence, enhanced worker compensation comes at the expense of entrepreneurial profits.
The Ricardo Revolution: Mastering David Ricardo's Economic Legacy
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