An increase in the money wage rate shifts
A)both the SAS curve and the LAS curve rightward.
B)both the SAS curve and the LAS curve leftward.
C)the SAS curve leftward, but leaves the LAS curve unchanged.
D)the LAS curve rightward, but leaves the SAS curve unchanged.
E)the SAS curve rightward, but leaves the LAS curve unchanged.

Question

Quizplus · Accepted Answer

An increase in the money wage rate will increase the cost of production, which will cause firms to supply less output at any given price level. This is represented by a leftward shift of the SAS curve. However, it does not directly affect the factors that determine the position of the LAS curve, such as potential real GDP, the natural rate of unemployment, or productivity. Therefore, the LAS curve remains unchanged.

An Increase in the Money Wage Rate Shifts