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Figure: Shifts of the AD-AS Curves
-(Figure: Shifts of the AD-AS Curves) Refer to Figure: Shifts of the AD-AS Curves. A decrease in wages in the short run is illustrated by panel:
A) (a).
B) (b).
C) (c).
D) (d).

Question

Use the following to answer questions:
Figure: Shifts of the AD-AS Curves 
-(Figure: Shifts of the AD-AS Curves) Refer to Figure: Shifts of the AD-AS Curves. A decrease in wages in the short run is illustrated by panel:
A) (a). 
B) (b). 
C) (c). 
D) (d).

Quizplus · Accepted Answer

A decrease in wages in the short run would reduce firms' production costs, leading to an increase in the aggregate supply. This is illustrated in panel (c) by the shift of the short-run aggregate supply curve to the right, from SRAS1 to SRAS2, without affecting the long-run aggregate supply curve (LRAS).

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