If Wages Are Not as Flexible as Prices in the AD-AS

question 67

Multiple Choice

If wages are not as flexible as prices in the AD-AS model, an increase in money growth will lead to:

• A) an increase in inflation and a rise in real long-run GDP growth.
• B) an increase in inflation, but no rise in real short-run GDP growth.
• C) an increase in inflation and in the profits of firms.
• D) no change in inflation, but a fall in the profits of firms.

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