If the price level increases and workersʹ money wage rates remain constant,which of the following will occur?
I. The quantity of labor supplied will decrease.
II. The real wage rate will decrease.
III. The labor supply curve will shift rightward.

Question

Quizplus · Accepted Answer

When the price level increases and workers' money wage rates remain constant, the real wage rate will decrease (II). This is because the purchasing power of the money wage has decreased. As a result, the quantity of labor supplied will decrease (I). The labor supply curve will not shift rightward (III).

If the Price Level Increases and Workersʹ Money Wage Rates