The article explores how wage indexation and monetary policy can be affected by supply shocks. It presents optimal rules for wage indexation and money supply, and evaluates different scenarios. When the demand for labor is more elastic than the supply, stabilizing employment is better than stabilizing real wages. Indexing wages to nominal GNP is more beneficial than indexing to the value-added price index or CPI. Similarly, targeting the money supply to nominal GNP is more effective than targeting the value-added price index or CPI. The ranking changes when the elasticity of labor supply exceeds the demand.