If productivity increases by 2 percent but wages increase by 3 percent, then it is most likely that the:
A)short-run aggregate supply curve will shift up (to the left).
B)short-run aggregate supply curve will shift down (to the right).
C)short-run aggregate supply curve will not shift.
D)aggregate demand curve will shift left.

Question

Quizplus · Accepted Answer

When wages increase faster than productivity, production costs rise, leading to a decrease in short-run aggregate supply, causing the curve to shift up (to the left).

If Productivity Increases by 2 Percent but Wages Increase by 3