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Question
In the short run, the aggregate quantity supplied may exceed the full-employment level of output. This is because as the price level rises:
a. firms mistake lower real wage rates for lower money wage rates and therefore increase employment beyond the profit-maximizing level
b. firms mistake lower money wage rates for lower real wage rates and therefore increase employment beyond the profit-maximizing level
c. workers respond to falling real wage rates by working more hours, since the income effect outweighs the substitution effect
d. unemployed workers mistake higher nominal wage rates for higher real wage rates, causing employment and output to rise as they accept job offers more quickly
Answer
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Related questions
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