Suppose that wages increase sharply this year. Other things being equal a wide-spread increase in wages will have which of the following consequences for the U.S. economy?
A. An increase in the equilibrium price level and a decrease in equilibrium real GDP
B. An increase in both equilibrium price level and equilibrium real GDP
C. A decrease in both the equilibrium price level and equilibrium real GDP
D. A decrease in the equilibrium price level and an increase in equilibrium real GDP
Answer: A