In the short run, higher than expected inflation puts _____ pressure on real wages and real rents, which leads businesses to _____ hiring.
A) downward; increase
B) upward; increase
C) downward; reduce
D) upward; reduce

Question

Quizplus · Accepted Answer

Higher than expected inflation reduces the purchasing power of money, which puts downward pressure on real wages and real rents. Businesses find labor and renting spaces relatively cheaper, which can lead them to increase hiring due to lower real costs.

In the Short Run, Higher Than Expected Inflation Puts _____