Suppose an economy moves from point B3 to point C3 because of an increase in aggregate demand. Given the scenario, which of the following is likely to occur?

Question 59 options:

a)

Nominal wages will rise, and profits will decrease, thereby negating the short-run stimulus to production and employment so that the economy moves from C3 to B4.

b)

Real wages will rise, and profits will decrease, thereby negating the short-run stimulus to production and employment so that the economy moves from C1 to B1.

c)

Nominal wages will rise, and profits will decrease, thereby negating the short-run stimulus to production and employment so that the economy moves from C3 to B3.

d)

Nominal wages will rise, and profits will decrease, thereby negating the short-run stimulus to production and employment so that the economy moves from C3 to C2.

e)

None of the above