In the Keynesian model with a fixed price level and a fixed money wage, an increase in the money supply will cause
a. output to fall and interest rates to fall.
b. output to remain unchanged.
c. output to rise and the price level to fall.
d. output to rise and interest rates to fall.
Question 2
According to efficiency wage models,
a. their key element is an explanation of why the efficiency (or productivity) of workers depends on the real wage.
b. the rationale underlying those models implies that firms will set the real wage below the market clearing level.
c. they explain real wage volatility.
d. all of the above.
