Macroeconomics Help Needed?

Question

Producing a short-run level of aggregate output that exceeds the economy's potential output results in

a. a downward adjustment in nominal wages

b. an upward adjustment in profits per unit of output

c. a downward adjustment in production costs

d. an upward adjustment in nominal wages

Answer 1

d. an upward adjustment in nominal wages (in longer-run)

But it actually depends on how sticky nominal wages are - for such pattern it is required that this stickiness is relaxed a bit.

In some sense "c" sometimes is true too - (not for total costs but for per-unit of output costs) - because labor costs are nominally fixed, thus real labor-costs (W/P) falls due to inflation (though there is production capital capacity limitations)

Actually "b" has rational kernel too - since real wages fall due to wage-stickiness thus per unit costs may fall (within capital capacity limits) but real revenue increases, thus per unit profits increase too.