A large manufacturing company agrees to a 5% nominal wage increase for its entire workforce. To cover these new, higher labor costs, the company's management immediately decides to raise the prices of its products by 5%. Which statement best analyzes the combined effect of these actions?

Corporate Response to Rising Labor Costs

A large industry grants its workers a significant nominal wage increase. Arrange the following events in the logical order that describes how this action can contribute to a self-perpetuating inflationary cycle.

Firm Pricing Strategy and Economic Cycles