Start at full-employment (FE) equilibrium with flexible wages and worker misperception of price level changes in the short run. Suppose then that we have an increase in Aggregate Demand. What are the short- run effects on price level (P), output level (Q), wage level (W), employment (L), and unemployment (U)?

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a. Pl. Qf. W↓, Lt. Uf b. Pl. Qf, W↑. LI.UT c. P1, Q1, W1, L1,U! d. P, Q, WI, LI,U e. Pl. Qf. WI, LI, UN a. Pl. Qf. W↓, Lt. Uf b. Pl. Qf, W↑. LI.UT c. P1, Q1, W1, L1,U! d. P, Q, WI, LI,U e. Pl. Qf. WI, LI, UN

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From the point of full employment and equilibirium an increase ... View the full answer