The Fact That Nominal Wages Are Fixed by a Contract

question 39

Multiple Choice

The fact that nominal wages are fixed by a contract at the beginning of a period while prices of goods may change within that period, implies that

• A)unanticipated changes in the money supply do not affect the level of output
• B)there is no trade-off between unemployment and inflation
• C)firms want to supply more output when prices increase since the real wage rate is lower
• D)anticipated monetary policy changes will not affect the level of inflation
• E)money supply changes affect prices but not unemployment in the short run

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Definitions:

Nonrivalry-in-Consumption

A characteristic of certain goods where one person's consumption does not reduce the availability of the good for consumption by others.

External Benefit

A benefit that results from an economic transaction but is received by individuals or groups who are not direct parties to the transaction.

Economic Efficiency

A situation where the allocation of resources produces the maximum possible satisfaction of our wants without wasting any resources.

Substandard Concrete

Concrete that does not meet the required quality standards, posing risks to structural integrity and safety.