Suppose the price level rises and the money wage remains constant. This set of changes leads to
A) a leftward shift of the SAS curve.
B) an upward movement along the LAS curve.
C) an upward movement along the SAS curve.
D) a leftward shift of the SAS curve and the LAS curve.

Question

Quizplus · Accepted Answer

When the price level rises and the money wage remains constant, the real wage decreases, making labor cheaper for firms. This results in an upward movement along the Short-Run Aggregate Supply (SAS) curve as firms are willing to produce more at higher price levels.

Suppose the Price Level Rises and the Money Wage Remains