An increase in the money wage rate shifts
A)both SAS and LAS rightward.
B)both SAS and LAS leftward.
C)SAS leftward, but leaves LAS unchanged.
D)LAS rightward, but leaves SAS unchanged.
E)SAS rightward, but leaves LAS unchanged.

Question

Quizplus · Accepted Answer

An increase in the money wage rate would increase the per-unit production costs for firms. This would result in a leftward shift of the short-run aggregate supply (SAS) curve, as firms would need to charge higher prices to cover their increased costs. However, the long-run aggregate supply (LAS) curve is determined by the economy's productive capacity and is not affected by changes in the money wage rate. Therefore, the LAS curve would remain unchanged.

An Increase in the Money Wage Rate Shifts