Producing a short-run level of aggregate output that exceeds the economy's potential output results in a(n) _____ adjustment in _____.
A) downward; nominal wages
B) downward; profits per unit of output
C) downward; production costs
D) upward; nominal wages

Question

Quizplus · Accepted Answer

Producing above potential output in the short run puts upward pressure on nominal wages as firms compete for a limited supply of labor, driving wages up.

Producing a Short-Run Level of Aggregate Output That Exceeds the Economy's