If wage rates fall at the same time that labor productivity increases,what is the effect on short-run aggregate supply (SRAS)?
A) SRAS falls.
B) SRAS remains constant.
C) SRAS rises.
D) SRAS may rise,fall,or remain constant.

Question

Quizplus · Accepted Answer

When wage rates fall and labor productivity increases simultaneously, this means that the cost of production has decreased for firms. As a result, firms are now able to produce more output at a lower cost of production. This will cause SRAS to shift to the right, indicating that at any given price level, firms will now be able to produce more output due to the lower production costs. Therefore, SRAS will rise.

If Wage Rates Fall at the Same Time That Labor