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

question 19

Multiple Choice

Figure 8-3
-Employing Figure 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

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Definitions:

Economic Assistance

Financial aid provided by countries or international institutions to support the economic development and welfare of disadvantaged regions or countries.

United States

A federal republic in North America, composed of 50 states, a federal district, and several territories, known for its large economy and diverse population.

Year

A measurement of time that represents the period it takes for the Earth to complete one orbit around the Sun, approximately 365 or 366 days.

Soft Power

The ability of a country to shape the preferences of others through appeal and attraction, rather than coercion or payment.