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

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