a possible monetary policy would be for the central bank to expand the money stock until the price level in inflated by as much as money wages increased, lowering the real wage to (W/P) the level of employment to N and output to Y0 such a policy would, however, serve to drive down the real wage to its previous full-employment level. if labor desires a higher real wage and exercises market power to achieve higher money wages, the danger of a wage-price-wage spiral is introduced