Final answer:
Falling nominal wages result in the short-run aggregate supply curve shifting rightward, increasing output back to full employment levels. The correct option is B. right; rise.
Step-by-step explanation:
Over the long run, falling nominal wages will shift the short-run aggregate supply curve to the right, which causes output to rise back to the full employment level. Therefore, the correct answer to the question is B. right; rise. This outcome occurs because lower nominal wages decrease the costs of production for businesses, leading them to increase the output.
This shift of the short-run aggregate supply curve (SRAS) is part of the self-correcting mechanism in the economy that pushes output back toward the full employment level after a period of high unemployment or recession. As nominal wages decrease, it becomes more cost-effective for firms to hire workers, thus increasing production and shifting the SRAS curve to the right.