Consider the economy's aggregate supply curve.Other things being equal,unit costs will tend to fall if
A)there is a fall in the price of oil.
B)the government increases payroll taxes.
C)wages fall.
D)wage and price controls are in effect.
E)wage increases are less than productivity increases.

Question

Quizplus · Accepted Answer

If wages increase less than productivity increases, it means that unit labor costs will decrease, which will lead to a decrease in overall production costs. This will likely shift the aggregate supply curve to the right, causing an increase in output and a decrease in price levels. Thus, E is the correct choice. A, B, and D do not lead to a decrease in unit costs and may even increase them, while C may decrease wages but does not consider productivity increases.

Consider the Economy's Aggregate Supply Curve