In an economic model where firms determine their prices by adding a fixed percentage markup over their labor costs, suppose there is an unexpected, economy-wide increase in the nominal wage paid to workers. What is the immediate reaction of firms and the resulting effect on the real wage?
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In an economic model where firms determine their prices by adding a fixed percentage markup over their labor costs, suppose there is an unexpected, economy-wide increase in the nominal wage paid to workers. What is the immediate reaction of firms and the resulting effect on the real wage?
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An economy is in equilibrium where the real wage is determined by firms' pricing decisions. Following an unexpected, economy-wide increase in nominal wages, arrange the subsequent events in the correct chronological order.