The aggregate supply curve slopes ________ because a ________ in the price level brings a ________ in the real wage rate.
A)upward;rise;rise
B)downward;fall;rise
C)upward;rise;fall
D)upward;fall;fall
E)downward;rise;rise

Question

Quizplus · Accepted Answer

According to the sticky wage model, the short-run aggregate supply curve is upward sloping because prices are sticky in the short run, meaning that wages and other input prices do not adjust immediately to changes in the overall price level. As a result, an increase in the price level causes firms to increase output and hire more workers, leading to a rise in the real wage rate. Conversely, a fall in the price level causes firms to reduce output and lay off workers, leading to a fall in the real wage rate. Therefore, the correct answer is C: upward sloping; rise in price level; fall in real wage rate.

The Aggregate Supply Curve Slopes ________ Because a ________ in the Price

The Aggregate Supply Curve Slopes Because a in the Price