When the aggregate demand pushes production above full employment in the short run, then:
A) firms find it easy to hire and retain workers, so wages rise.
B) firms find it hard to hire and retain workers, so wages drop.
C) firms find it easy to hire and retain workers, so wages drop.
D) firms find it hard to hire and retain workers, so wages rise.

Question

Quizplus · Accepted Answer

When aggregate demand exceeds full employment in the short run, there is excess demand for labor, leading to a labor shortage. Firms will have to compete to attract workers, bidding up wages. Therefore, firms find it hard to hire and retain workers, causing wages to rise.

When the Aggregate Demand Pushes Production Above Full Employment in the Short