Assume That Expectations of Productivity Are Slow to Adjust

Multiple Choice

Assume that expectations of productivity are slow to adjust. Further assume that A had been increasing by 6% a year. Now suppose that A only increases by 2% in period t. This slowdown in productivity growth will cause:

A) the WS relation to shift up more than the PS relation.
B) the PS and WS relations to shift up by the same amount.
C) the real wage to fall.
D) the PS relation to shift up more than the WS relation.
E) the natural rate of unemployment to fall.