An economy currently has a inflationary gap. An increase in the money wage rate will the inflationary gap and the price level.
A) decrease; increase
B) increase; increase
C) increase; decrease
D) decrease; decrease

Question

Quizplus · Accepted Answer

An increase in the money wage rate will increase the aggregate demand, which will lead to an increase in the inflationary gap and the price level.

An Economy Currently Has a Inflationary Gap