In the short run,a decrease in wage rates,ceteris paribus,shifts the
A) AD curve to the right,causing equilibrium price level to rise and equilibrium Real GDP to increase.
B) AD curve to the left,causing equilibrium price level to fall and equilibrium Real GDP to decrease.
C) SRAS curve to the right,causing equilibrium price level to fall and equilibrium Real GDP to increase.
D) SRAS curve to the left,causing equilibrium price level to rise and equilibrium Real GDP to decrease.

Question

Quizplus · Accepted Answer

In the short run, a decrease in wage rates will lower the cost of production for businesses, allowing them to produce goods and services at a lower cost. This will shift the short-run aggregate supply (SRAS) curve to the right. As a result, the equilibrium price level will fall and the equilibrium real GDP will increase. This is because the lower production costs will encourage businesses to increase their output, leading to a higher level of economic activity.

In the Short Run,a Decrease in Wage Rates,ceteris Paribus,shifts the