Use the table below to answer the following questions.
Table 26.3.3

-Refer to Table 26.3.3. With no interference from the central bank or the government, the
A)money wage rate will eventually rise.
B)money wage rate will eventually fall.
C)short-run aggregate supply curve will shift leftward.
D)long-run aggregate supply curve will shift leftward.
E)aggregate demand curve will shift rightward.

Question

Use the table below to answer the following questions.
Table 26.3.3
 
-Refer to Table 26.3.3. With no interference from the central bank or the government, the
A)money wage rate will eventually rise. 
B)money wage rate will eventually fall. 
C)short-run aggregate supply curve will shift leftward. 
D)long-run aggregate supply curve will shift leftward. 
E)aggregate demand curve will shift rightward.

Quizplus · Accepted Answer

In Table 26.3.3, when there is a decrease in the labor force supply, the quantity of labor falls and the wage rate decreases in the short run. However, in the long run, this will lead to a decrease in the price level and the money wage rate will eventually fall. This is because firms will adjust their prices downwards to maintain their profit margins. Therefore, the best choice is B, as the money wage rate will eventually fall without interference from the central bank or the government.

Use the Table Below to Answer the Following Questions