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

Question

Quizplus · Accepted Answer

A decrease in the money wage rate increases the Short-Run Aggregate Supply (SAS) because it reduces production costs, making it cheaper for firms to produce goods and services, thus increasing the quantity of goods and services that firms are willing to supply at a given price level. An increase in the full-employment quantity of labor increases both the Short-Run Aggregate Supply (SAS) and the Long-Run Aggregate Supply (LAS) because it expands the economy's productive capacity, allowing more goods and services to be produced both in the short run and in the long run.

A Decrease in the Money Wage Rate Increases ________ and an Increase