Assuming that as a result of observed past increases in the aggregate price level,workers' expectation of the current price level rises.Then,
A)less labor will be supplied at each money wage because with the higher expectation about the aggregate price level since a given money wage corresponds to a lower real wage.
B)the firm has to pay a higher money wage in order to obtain a given quantity of labor.
C)more labor will be supplied at each money wage because with the higher expectation about the aggregate price level since a given money wage corresponds to a higher real wage.
D)Both a and b
E)Both b and c

Question

Quizplus · Accepted Answer

When workers expect higher prices, they perceive their real wages (the purchasing power of their wages) as being lower at current money wage rates, leading them to supply less labor at each money wage. Consequently, firms must offer higher money wages to attract the same quantity of labor, making both A and B correct.

Assuming That as a Result of Observed Past Increases in the Aggregate