Workers and Firms Both Expect That Prices Will Be 2

Multiple Choice

Workers and firms both expect that prices will be 2.5% higher next year than they are this year.As a result

A) workers will be willing to take lower wages next year,but not lower than a 2.5 percent decrease.
B) the purchasing power of wages will rise if wages increase by 2.5%.
C) the short-run aggregate supply curve will shift to the left as wages increase.
D) aggregate demand will increase by 2.5%.