One danger of using monetary policy to end a recession is that
A) sticky wages will have the purchasing power eroded.
B) prices will rise and workers will demand higher wages.
C) it might not be possible for AD to shift enough.
D) none of the above.

Question

Quizplus · Accepted Answer

Monetary policy to end a recession often involves increasing the money supply to stimulate economic activity. This can lead to higher prices as demand increases. As prices rise, workers may demand higher wages to maintain their purchasing power, leading to inflationary pressures.

One Danger of Using Monetary Policy to End a Recession