Autoworkers agree to a cut in the nominal wage rate. This event ________ short-run aggregate supply and ________ long-run aggregate supply.
A)does not change; does not change
B)decreases; does not change;
C)increases; does not change;
D)increases; increases
E)decreases; does not change

Question

Quizplus · Accepted Answer

A cut in the nominal wage rate reduces production costs, increasing short-run aggregate supply. Long-run aggregate supply remains unchanged as it is determined by factors like technology and resources, not nominal wages.

Autoworkers Agree to a Cut in the Nominal Wage Rate