We observe the duration of unemployment falling and wage rates rising. It is likely that
A)the government has initiated expansionary fiscal policy but the policies haven't taken effect yet.
B)summer has arrived.
C)aggregate demand has increased.
D)aggregate supply has increased.

Question

Quizplus · Accepted Answer

The falling duration of unemployment and rising wage rates suggest an increase in aggregate demand. As firms need to hire more workers to increase output to meet the increased demand, the unemployment rate falls and wage rates rise due to the higher demand for workers. The other options do not explain these specific observations.

We Observe the Duration of Unemployment Falling and Wage Rates