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

Question

Quizplus · Accepted Answer

An increase in money wage rate leads to an increase in firms' production costs, reducing their willingness to supply goods and services in the short run due to a decrease in profits. As a result, the short-run aggregate supply decreases.

An Increase in the Money Wage Rate