Suppose That Union Leaders Negotiate a Significant Increase in Nominal

question 12

Multiple Choice

Suppose that union leaders negotiate a significant increase in nominal wages. If the Federal Reserve holds the growth in the money supply constant, in the short run the aggregate supply curve will shift

• A) up, unemployment will increase, and prices will rise.
• B) down, unemployment will increase, and prices will rise.
• C) down, unemployment will decrease, and prices will rise.
• D) up, unemployment will decrease, and prices will rise.

---

Definitions:

Marginal Social Cost

The total cost to society of producing one additional unit of a good or service.

Public Good

A product or service that is available for all to consume, regardless of who pays and who doesn't, characterized by non-excludability and non-rivalry.

Free-ride

The act of benefiting from resources, goods, or services without paying for the cost of the benefit.

Rival

In economics, a good or service is considered rival if its consumption by one individual prevents simultaneous consumption by other individuals.