If the price level increases and workers' money wage rates remain constant,which of the following will occur?
I. The quantity of labor supplied will decrease.
II. The real wage rate will decrease.
III. The labor supply curve will shift rightward.

Question

Quizplus · Accepted Answer

When the price level increases and workers' money wage rates remain constant, the purchasing power of their wages decreases, leading to a decrease in the real wage rate. This does not necessarily mean that the quantity of labor supplied will decrease or that the labor supply curve will shift rightward; these outcomes depend on workers' responses to changes in real wages.

If the Price Level Increases and Workers' Money Wage Rates