If there is a decrease in the percentage of employees whose wages adjust automatically with changes in the price level, the aggregate supply curve will become
A) steeper.
B) flatter.
C) horizontal.
D) vertical.

Question

Quizplus · Accepted Answer

If there is a decrease in the percentage of employees whose wages adjust automatically with changes in the price level, it means that there will be fewer flexible prices in the economy, leading to a flatter aggregate supply curve. This is because firms will be less willing to adjust their prices upward in response to higher demand due to increased costs of production. Therefore, the aggregate supply curve will be less responsive to changes in the price level.

If There Is a Decrease in the Percentage of Employees