As the money wage rate rises,
A) the long- run aggregate supply curve shifts rightward.
B) the short- run aggregate supply curve shifts leftward.
C) the short- run aggregate supply curve shifts rightward.
D) both the long- run aggregate supply curve and the short- run aggregate supply curve shift leftward.

Question

Quizplus · Accepted Answer

As the money wage rate rises, the cost of production increases for firms, leading them to supply less goods and services at the current price level in the short run. This leads to a leftward shift in the short-run aggregate supply curve. However, in the long run, there may be adjustments such as increases in productivity or changes in technology that cause the long-run aggregate supply curve to shift rightward.

As the Money Wage Rate Rises