With a fixed nominal wage the SAS curve is positively sloped because
A)an increase in P decreases the real wage and raises profits if output is increased.
B)A decrease in P decreases the real wage and raises profits if output is increased.
C)business firms are responsive to interest rates.
D)the marginal leakage rate is small.

Question

Quizplus · Accepted Answer

With a fixed nominal wage, an increase in P decreases the real wage, which means that the cost of production decreases, leading to an increase in profits if output is increased. Business firms are not necessarily responsive to interest rates, and the concept of marginal leakage rate is unrelated to the SAS curve.

With a Fixed Nominal Wage the SAS Curve Is Positively