Suppose that the government enforced a law which required employers to adjust nominal wages monthly by the previous month's CPI.The short-run SAS curve would shift ________ and the SP curve would be ________.
A)gradually;stable
B)rapidly;unstable
C)continuously;flat
D)slowly;steep

Question

Quizplus · Accepted Answer

The short-run SAS curve would shift rapidly because wages are adjusted monthly in response to changes in the CPI, leading to frequent changes in production costs. The SP curve would be unstable because the constant adjustments in wages in response to CPI changes could lead to unpredictable and volatile shifts in supply conditions.

Suppose That the Government Enforced a Law Which Required Employers