Which of the following is true according to the sticky-wage theory of aggregate supply as a result of the increase in the money supply? Check all that apply.

a. Nominal wages at the initial equilibrium are less than nominal wages at the new short-run equilibrium.

b. Nominal wages at the initial equilibrium are less than nominal wages at the new long-run equilibrium.

c. Real wages at the initial equilibrium are greater than real wages at the new short-run equilibrium.

d. Real wages at the initial equilibrium are greater than real wages at the new long-run equilibrium.

Question

Aspen Landry

Business

7 July, 12:49

Which of the following is true according to the sticky-wage theory of aggregate supply as a result of the increase in the money supply? Check all that apply.

a. Nominal wages at the initial equilibrium are less than nominal wages at the new short-run equilibrium.

b. Nominal wages at the initial equilibrium are less than nominal wages at the new long-run equilibrium.

c. Real wages at the initial equilibrium are greater than real wages at the new short-run equilibrium.

d. Real wages at the initial equilibrium are greater than real wages at the new long-run equilibrium.

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Answers (1)

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Guillermo Berry · Answer 1

Answer:y

Option D is correct

Explanation:

This is based on the reduction of purchasing power of the wage because increase in money supply would inflate the price which means wages can only purchase fewer goods and services so real wage at initial equilibrium is greater than the long run real wage.