Question 1:

According to the auction theory developed above, an increase in nominal aggregate demand in the economy

1. will always cause aggregate output and employment to increase.

2. will always cause the real wage rate to increase.

3. will cause the aggregate supply curve of labour to remain unchanged if workers and firms perceive the observed shifts in the demands for their output to be specific to their own industries.

4. will do all of the above.

Choose the correct option.