A rise in nominal wages represents:
A)a right shift of supply for firms.
B)an increase in employment.
C)an increase in production costs.
D)a decrease in production costs.

Question

Quizplus · Accepted Answer

A rise in nominal wages means that firms have to pay their workers more, which increases their production costs. This often leads to firms increasing the price of their goods or services, which can result in inflation. It may also lead to firms reducing employment or automation to offset the increased cost of production. Therefore, option C is the correct answer. A right shift of supply for firms (option A) would only occur if there were an increase in the availability of factors of production, such as labor or capital. Option B is incorrect because an increase in nominal wages does not necessarily mean an increase in employment. Option D is also incorrect because a rise in nominal wages would not lead to a decrease in production costs.

A Rise in Nominal Wages Represents