Suppose you have the following measure of nominal GDP by the income approach. GDP = W + GCS + GMI + TIN GDP = 400 + 100 + 250 + 250 = 1,000 Now an increase in the average wage rate in the economy increases employment compensation by 7 percent. Assuming there is no change in total employment, capital consumption and indirect business taxes. a) What effect would this increase in employment compensation have on costs of production? O Factor costs remain unchanged O Increases factor costs O Decreases factor costs b) If businesses raised prices to pass on these changed costs to buyers, how much would prices change, as measured by the GDP deflator? Note: Keep as much precision as possible during your calculations. Your final answer should be accurate to at least two decimal places. GDP deflator (select here) by 0%