If Labor Unions Negotiate an Increase in the Nominal Wage

question 154

Multiple Choice

If labor unions negotiate an increase in the nominal wage rate the SAS curve will shift

• A)upward to the right and output will increase.
• B)downward to the right and output will increase.
• C)downward to the left and output will decrease.
• D)upward to the left and output will decrease.

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Definitions:

Ceiling Prices

Maximum legal prices set by governments for essential goods or services, intended to prevent prices from rising above a certain level during shortages or periods of high inflation.

Sales Tax

A tax on sales or on the receipts from sales.

Price Ceiling

A government-imposed limit on how high a price can be charged on a product or service, intended to protect consumers from conditions that could make commodities prohibitively expensive.

Price Floor

A government-imposed minimum price that can be charged for goods or services, intended to prevent prices from falling too low.