A decrease in the money wage rate increases _________and an increase in the full employment quantity of labor increases _________.
A) only the LAS; the SAS and the LAS
B) only the SAS; the SAS and the LAS
C) the SAS and the LAS; only the LAS
D) the SAS and the LAS; only the SAS

Question

Quizplus · Accepted Answer

A decrease in the money wage rate increases the SAS (short-run aggregate supply) because it lowers production costs for firms, allowing them to produce more output at each price level. An increase in the full employment quantity of labor increases both the SAS and the LAS (long-run aggregate supply) because it expands the economy's production possibilities, allowing it to produce more output at all price levels in the long run.

A Decrease in the Money Wage Rate Increases _________And an Increase