With a Constant Nominal Wage, a Higher-Than-Expected Level of Inflation

question 30

Multiple Choice

With a constant nominal wage, a higher-than-expected level of inflation in an economy _____.

• A) will lead to a fall in real wages
• B) will lead to a fall in employment
• C) will reduce short-run output
• D) will reduce the level of potential GDP

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Definitions:

Workman's Compensation

Insurance that provides wage replacement and medical benefits to employees injured in the course of employment.

Factory Utilities

Costs associated with utilities in a manufacturing plant, such as electricity and water, considered part of manufacturing overhead.

Direct Materials

Raw materials that are directly traceable to the process of creating a finished product.

Cost of Goods Sold

The total cost of manufacturing or acquiring a product that is sold to customers, including materials and labor but not distribution or sales costs.