-In the above figure, the economy is initially at point A and then an increase in the quantity of money moves the economy to point D. The money wage rate will
A)fall because a labour shortage now exists.
B)fall because a labour surplus now exists.
C)rise because a labour shortage now exists.
D)rise because a labour surplus now exists.

Question

-In the above figure, the economy is initially at point A and then an increase in the quantity of money moves the economy to point D. The money wage rate will
A)fall because a labour shortage now exists. 
B)fall because a labour surplus now exists. 
C)rise because a labour shortage now exists. 
D)rise because a labour surplus now exists.

Quizplus · Accepted Answer

An increase in the quantity of money typically leads to higher demand for goods and services, which can increase demand for labor, creating a labor shortage and causing the money wage rate to rise.

-In the Above Figure, the Economy Is Initially at Point