In a simple economy, what is the expected effect on real and nominal flows in the short term if wages increase significantly?

Question

Answer

Real flows will remain unchanged because wages do not affect production, while nominal flows will increase.

Answer

Real flows will increase because consumers have more income to buy goods, and nominal flows will increase due to higher wages.

Answer

Both real and nominal flows will decrease as higher wages lead to reduced employment.

Answer

Real flows will decrease because firms will raise prices to cover wage increases, while nominal flows will remain unchanged.

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