Increases in nominal wages in the economy are generally caused by which force(s)?

Question

Quizplus · Accepted Answer

Increases in nominal wages in the economy are generally caused by a combination of the output-gap effect (resulting from a tight labor market with low unemployment) and the expectational effect (driven by workers' expectations of future inflation and their desire to maintain real wages). Supply-shock inflation (which can result from an unexpected increase in the cost of production inputs) may also contribute to higher nominal wages, but it is not typically the main driver.

Increases in Nominal Wages in the Economy Are Generally Caused