Figure 8-3 -Employing Figure 8-3 Above and Assuming the Nominal Money Supply

question 94

Multiple Choice

Figure 8-3

-Employing Figure 8-3 above and assuming the nominal money supply is not altered,a permanent adverse supply side shock puts ________ pressure on nominal wages during renegotiation provided ________.

• A)no;the reduction in the natural real GDP YN to Y₁ is exactly offset by the fall in goods demanded due to the rise in the price level
• B)downward;the reduction in the real GDP YN to Y₂ is exactly offset by the fall in goods demanded due to the rise in the price level
• C)upward;the reduction in the natural real GDP is exactly offset by the fall in goods demanded due to the rise in the price level
• D)no;since the natural real GDP does not change

---

Definitions:

Monopolistically Competitive

Describes a market structure where many companies sell products that are substitutes, but are not perfect substitutes, leading to some degree of market power for each firm.

Barriers to Entry

Obstacles that make it difficult for new competitors to enter a market, such as high startup costs or strict regulations.

Product Differentiation

The process of distinguishing a product from others in the market to make it more attractive to a particular target market.

Brand Names

Distinctive names given to products or services by companies to differentiate them from competitors and build brand identity.