What happens to nominal wages in the short run when the price level decreases?

Multiple choice question.

They decrease.

They increase.

They remain unchanged.

The decrease at an exponential rate.

1 answer

In the short run, when the price level decreases, nominal wages typically remain unchanged. This is because nominal wages are often rigid or sticky downwards, meaning they do not adjust immediately or easily in response to changes in the price level. Therefore, the correct answer is:

They remain unchanged.