If the price level increases, but workersʹ money wage rates remain constant,which of the following is TRUE?
I. The quantity of labor demanded will increase.
II. The real wage rate will decrease.
III. The demand for labor curve shifts rightward.

Question

Quizplus · Accepted Answer

When the price level increases and money wages remain constant, the real wage rate (purchasing power of wages) decreases, leading to an increase in the quantity of labor demanded. However, the demand for labor curve does not shift; it is a movement along the curve.

If the Price Level Increases, but Workersʹ Money Wage Rates