Answer to Question #308505 in Macroeconomics for Jackey

Question

Suppose that aggregate demand increases, starting from an equilibrium income level. This implies upwards pressure on the average consumption levels and output that increases. Since the standard of living of employees decreases owing to the higher prices, the employees will start to negotiate higher nominal wages. This is called the short-run demand adjustment process. True or False

Answer 1

This is called the short-run demand adjustment process. 

The correct answer is: False

 This is long-run demand adjustment process