An increase in the money wage rate shifts
A)both the SAS curve and the LAS curve rightward.
B)both the SAS curve and the LAS curve leftward.
C)the LAS curve rightward, but leaves the SAS curve unchanged.
D)the SAS curve rightward, but leaves the LAS curve unchanged.
E)the SAS curve leftward, but leaves the LAS curve unchanged.

Question

Quizplus · Accepted Answer

An increase in the money wage rate increases the cost of production for businesses. This leads to a decrease in the quantity of goods and services that firms are willing to supply at any given price level, shifting the Short-run Aggregate Supply (SAS) curve leftward. The Long-run Aggregate Supply (LAS) curve remains unchanged because it represents the economy's potential output, which is not affected by changes in the price level or wage rates in the long run.

An Increase in the Money Wage Rate Shifts