In the long run, if the price level increases, then nominal wages and other input prices:
A) Also rise, so firms will reduce their output level
B) Also rise, so firms will not change their output level
C) Not change, so firms will not change their output level
D) Decrease, so firms will increase their output level

Question

Quizplus · Accepted Answer

In the long run, nominal wages and input prices adjust to changes in the price level, leading firms to maintain their output level as real costs remain unchanged.

In the Long Run, If the Price Level Increases, Then