Suppose the price level rises and the money wage remains constant. This set of changes leads to
A) an upward movement along the LAS curve.
B) an upward movement along the SAS curve.
C) a leftward shift of the SAS curve.
D) a leftward shift of the SAS curve and the LAS curve.

Question

Quizplus · Accepted Answer

When the price level rises and the money wage remains constant, firms' production costs do not increase, so they are willing to supply more at the higher price level. This is represented by an upward movement along the Short-Run Aggregate Supply (SAS) curve, not a shift of the curve or any change in the Long-Run Aggregate Supply (LAS) curve.

Suppose the Price Level Rises and the Money Wage Remains