If labor union leaders are successful in demanding a wage increase, then their actions will cause:
A) AD to decrease.
B) the AS to increase.
C) AS to decrease.
D) AD to increase.

Question

Quizplus · Accepted Answer

When labor union leaders demand a wage increase, it means the cost of production for the firms will increase. This will cause a decrease in AS (Aggregate Supply) as firms will have to produce less output at higher costs.

If Labor Union Leaders Are Successful in Demanding a Wage