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Consider a closed economy described by a Keynesian model with labour contract and nominal wage rigidity . The economy is originally in a general equilibrium.

Consider a closed economy described by a Keynesian model with labour contract and nominal wage rigidity . The economy is originally in a general equilibrium. Let's now consider an unexpected monetary expansion.

In the short-run equilibrium what happens to the wages...?

a)the nominal wage doesn't change and real wage rises

b)the nominal wage doesn't change and real wage falls

c)the nominal wage rises and real wage doesn't change

D)the nominal wage falls and real wage doesn't change

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