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

Question

Quizplus · Accepted Answer

A decrease in the money wage rate reduces firms' costs, leading to an increase in their profitability and incentive to produce more output. This leads to an increase in short-run aggregate supply.

A Decrease in the Money Wage Rate