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

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