A reduction in nominal wages will cause which of the following?
A) a movement along the short-run aggregate supply curve
B) a shift of both the short-run and long-run aggregate supply curves
C) a rightward shift in the short-run aggregate supply curve
D) a leftward shift in the short-run aggregate supply curve to shift to the left

Question

Quizplus · Accepted Answer

A reduction in nominal wages decreases the cost of production for firms, which typically allows them to produce more at every price level. This is represented by a rightward shift in the short-run aggregate supply curve, as firms are willing and able to supply more goods and services at the same price levels.

A Reduction in Nominal Wages Will Cause Which of the Following