A fall in the money wage rate shifts
A) both the SAS and LAS curves rightward.
B) the LAS curve rightward but leaves the SAS curve unchanged.
C) both the SAS and LAS curves leftward.
D) the SAS curve rightward but leaves the LAS curve unchanged.

Question

Quizplus · Accepted Answer

When the money wage rate falls, the SAS (short-run aggregate supply) curve shifts rightward because firms can now hire more workers at lower wages, which increases output and lowers prices. However, the LAS (long-run aggregate supply) curve remains unchanged because it is determined by factors such as technology, capital, and labor force size and quality, which are not affected by changes in the money wage rate. Therefore, the correct choice is D, as the SAS curve shifts rightward but leaves the LAS curve unchanged.

A Fall in the Money Wage Rate Shifts