If the price level rises above what was expected and nominal wages are fixed, then
A)production becomes less profitable so firms will hire fewer workers.
B)production becomes less profitable so firms will hire more workers.
C)production becomes more profitable so firms will hire fewer workers.
D)production become more profitable so firms will hire more workers.

Question

Quizplus · Accepted Answer

When the price level rises above expectations and nominal wages are fixed, firms receive higher prices for their products while their wage costs remain the same, making production more profitable. As a result, firms are likely to hire more workers to increase production.

If the Price Level Rises Above What Was Expected and Nominal