Based on your understanding of the AS- AD model, which of the following is an incorrect statement about the short- run adjustment process for the macroeconomy?
A) A decrease in output decreases employment.
B) Output in excess of the natural level leads to higher prices.
C) An increase in demand increases output.
D) An increase in unemployment leads to higher prices.
E) A decrease in output below the natural level leads to lower nominal wages.

Question

Quizplus · Accepted Answer

An increase in unemployment does not lead to higher prices. In fact, it leads to a decrease in prices due to a decrease in demand.

Based on Your Understanding of the AS- AD Model, Which