Suppose that the economy is operating at potential output and the money supply increases.Aggregate output will _____ potential output,nominal wages will _____,and the SRAS will shift _____.

Question

Quizplus · Accepted Answer

When the money supply increases, aggregate demand increases, causing aggregate output to rise above potential output. This leads to higher nominal wages as firms compete for workers, and the short-run aggregate supply (SRAS) shifts leftwards due to increased production costs.

Suppose That the Economy Is Operating at Potential Output and the Money