How will an increase in money wages affect the short-run aggregate supply curve?
A)It will shift left (an increase in short-run aggregate supply).
B)It will shift left (a decrease in short-run aggregate supply).
C)It will shift right (a decrease in short-run aggregate supply).
D)It will shift right (an increase in short-run aggregate supply).

Question

Quizplus · Accepted Answer

An increase in money wages will increase the cost of production for firms, reducing their profitability and decreasing their incentive to produce goods and services. As a result, they will reduce their output and shift the short-run aggregate supply curve to the left (decrease in short-run aggregate supply).

How Will an Increase in Money Wages Affect the Short-Run