Question
1. Which of the following is true according to the sticky-wage theory of aggregate supply as a result of the decrease in the money supply?
1. Which of the following is true according to the sticky-wage theory of aggregate supply as a result of the decrease in the money supply?Check all that apply.
Nominal wages at the initial equilibrium are greater than nominal wages at the new short-run equilibrium.
Nominal wages at the initial equilibrium are greater than nominal wages at the new long-run equilibrium.
Real wages at the initial equilibrium are less than real wages at the new short-run equilibrium.
Real wages at the initial equilibrium are less than real wages at the new long-run equilibrium.
2. What causes the economy to move from its short-run equilibrium to its long-run equilibrium?
The government increases spending to increase aggregate demand.
Nominal wages, prices, and perceptions adjust downward to this new price level.
Nominal wages, prices, and perceptions adjust upward to this new price level.
The government increases taxes to curb aggregate demand.
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