According to Gordon,an upward shift in the SAS curve caused by a renegotiation of nominal wages is
A)supply inflation since the SAS curve shifted.
B)not supply inflation since the required change in nominal wages is the result of past change in AD and pe.
C)natural since the SAS curve shifted.
D)a permanent acceleration of inflation.

Question

Quizplus · Accepted Answer

An upward shift in the short-run aggregate supply (SAS) curve caused by a renegotiation of nominal wages is not supply inflation since it is the result of a past change in aggregate demand (AD) and price expectations (Pe). Therefore, there is no permanent acceleration of inflation. In this case, the economy is simply adjusting to a new equilibrium with higher prices due to the increase in nominal wages.

According to Gordon,an Upward Shift in the SAS Curve Caused