If Wages Are Not as Flexible as Prices, an Increase

question 28

Multiple Choice

If wages are not as flexible as prices, 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 firms' profits.
• D) no change in inflation, but a fall in firms' profits.

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