Aggregate supply increases when:
A)wage rates decrease, while the economy's price level remains unchanged.
B)resource availability is reduced.
C)there are fewer workers.
D)there is less capital and the price level remains unchanged.
E)there are increased inflationary expectations of labour.

Question

Quizplus · Accepted Answer

When wage rates decrease while the economy's price level remains unchanged, firms can produce more output at a lower cost, which ultimately increases aggregate supply. This is because firms are employing workers at a lower wage rate and are therefore able to produce output at a lower cost than before, resulting in an increase in aggregate supply.

Aggregate Supply Increases When