A decrease in the money wage rate
A) increases the short- run aggregate supply.
B) decreases the short- run aggregate supply.
C) decreases the long- run aggregate supply.
D) increases the long- run aggregate supply.

Question

Quizplus · Accepted Answer

A decrease in the money wage rate reduces costs for firms, which in turn increases their profitability and willingness to produce. This leads to an increase in aggregate supply in the short-run, as firms increase output to take advantage of the lower costs of production.

A Decrease in the Money Wage Rate