If total income in Sweden remains the same but the wage share of income rises, the Swedish AD curve will most likely:
A)shift to the left.
B)shift to the right.
C)become flatter.
D)become steeper.

Question

Quizplus · Accepted Answer

If the wage share of income rises while total income remains the same, it implies a redistribution of income towards wages from profits. Since workers tend to have a higher marginal propensity to consume than capitalists (owners of capital), this redistribution is likely to increase overall consumption. Higher consumption, in turn, increases aggregate demand, leading to a rightward shift of the AD curve.

If Total Income in Sweden Remains the Same but the Wage