Suppose That Product Prices Start Rising but Nominal Wages Do

question 6

Multiple Choice

Suppose that product prices start rising but nominal wages do not. In that case,

• A) real wages will fall and firms will want to produce more because doing so will be profitable.
• B) real wages will rise and firms will want to produce more because doing so will be profitable.
• C) there will be a surplus of goods and services produced.
• D) there will be a shortage of goods and services produced.

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Definitions:

Period Lengthened

The extension of time allocated for a particular activity, phase, or process.

Price-taker Market

A market in which individual sellers cannot influence the market price and must accept the prevailing market price for their goods or services.

Antitheft Auto Alarms

Security devices installed in vehicles designed to deter theft by emitting a loud noise or other alerts when unauthorized access is attempted.

Increasing Cost Industry

An industry in which production costs rise as output increases, often due to factors like limited resources or increased demand for inputs.