In the Short Run, If the Price Level Increases, Then

question 100

Multiple Choice

In the short run, if the price level increases, then nominal wages:

• A) Stay fixed, therefore firms' revenues and profits will increase
• B) Stay fixed, and the firms' revenues and profits also stay the same
• C) Increase, causing firms' revenues and profits to fall
• D) Decrease, causing firms' revenues and profits to rise

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Definitions:

Production

The process of creating goods or services using inputs such as labor, materials, and technology.

Spreading Effect

refers to the phenomenon where the impact of a particular event, policy, or action extends or disperses across a wider area or population.

Diminishing Returns

An axiom indicating that beyond a certain level, additional investments in a given domain will not yield proportionally higher returns unless other variables are adjusted.

Variable Costs

Costs that vary directly with the level of production or output, such as materials and labor directly involved in production.