Which of the following is true of nominal wages when price levels rise in the short run?

Multiple choice question.

They remain fixed.

They decrease at first and then rise.

They increase proportionally with aggregate demand.

They increase proportionally with prices.

1 answer

In the short run, when price levels rise, nominal wages typically remain fixed. This is because wages are often set by contracts or agreements and do not adjust immediately with changes in the price level. Therefore, the correct answer is:

They remain fixed.