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An increase in aggregate demand is harmful because workers with sticky wages are paying more for goods and services
An increase in aggregate demand is harmful because workers with sticky wages are paying more for goods and services. firms have sticky input prices and earn less proht. O unemployment rises. output has risen above the full-employment level. wages will have to fall in the long run.
Expert Solution
1)
(d) Output has risen above the full-employment level.
"An increase in aggregate demand results in an increase in production, which means that more and more workers are employed to produce the increase in demand. More workers are employed and wages increase, along with the prices of the goods in demand. When the economy operates above its full employment equilibrium, it means that the demand for goods is more than the ability of the economy to produce those goods. This situation is a cause for concern, because it creates inflationary pressure on the economy.
Hence, the other options (a), (b), (c) and (e) are incorrect.
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