If wages are sticky,then a greater than expected increase in the price level
A)raises the real costs of production,so the short-run aggregate supply curve shifts left.
B)raises the real costs of production,so the aggregate quantity of goods and services declines.
C)reduces the real costs of production,so the short-run aggregate supply curve shifts right.
D)reduces the real costs of production,so the aggregate quantity of goods and services rises.

Question

Quizplus · Accepted Answer

If wages are sticky, they do not immediately adjust to changes in the price level. Therefore, a greater than expected increase in the price level reduces the real wage (cost of labor), which reduces the real costs of production, leading to an increase in the aggregate quantity of goods and services supplied.

If Wages Are Sticky,then a Greater Than Expected Increase in the Price