Multiple Choice
a decrease in aggregate demand and a decrease in unemployment that eventually increases nominal wages.
an increase in aggregate demand and a decrease in unemployment that eventually decreases nominal wages.
an increase in aggregate demand and an increase in unemployment that eventually decreases nominal wages.
an increase in aggregate demand and a decrease in unemployment that eventually increases nominal wages.
1 answer
The correct answer is:
an increase in aggregate demand and a decrease in unemployment that eventually increases nominal wages.
In the context of demand-pull inflation, an increase in aggregate demand typically leads to higher output and lower unemployment in the short run. As the economy reaches its capacity, the increasing demand for labor can lead to upward pressure on wages, resulting in higher nominal wages over time.
