An increase in labour costs by 5 percent, all other things held constant will:
A) lower nominal GDP by less than 5 percent.
B) raise nominal GDP by more than 5 percent.
C) leave nominal GDP unchanged.
D) raise nominal GDP by less than 5 percent.

Question

Quizplus · Accepted Answer

An increase in labor costs, assuming productivity and the amount of labor remain constant, would lead to an increase in the cost of goods and services produced. This would raise nominal GDP, but the increase in nominal GDP would likely be less than 5 percent because the total GDP is influenced by more factors than just labor costs, such as capital costs and productivity.

An Increase in Labour Costs by 5 Percent, All Other