According to Samuelson and Solow, when aggregate demand is high, how are unemployment, wages, and prices affected?
A) Unemployment is low, so there is upward pressure on wages and prices.
B) Unemployment is low, so there is downward pressure on wages and prices.
C) Unemployment is high, so there is upward pressure on wages and prices.
D) Unemployment is high, so there is downward pressure on wages and prices.

Question

Quizplus · Accepted Answer

According to Samuelson and Solow, when aggregate demand is high, there is a decrease in unemployment, which means there is upward pressure on wages and prices. This is because firms are trying to attract workers by offering higher wages, but they must also raise prices to cover their increased labor costs.

According to Samuelson and Solow, When Aggregate Demand Is High