Suppose the price level, the money wage, and the price of all other resources rise by 10 percent. This set of changes leads to
A) an upward movement along the LAS curve.
B) a downward movement along the LAS curve.
C) an upward movement along the SAS curve.
D) a leftward shift of the LAS curve.

Question

Quizplus · Accepted Answer

An increase in the price level, the money wage, and the price of all other resources will lead to an upward movement along the LAS curve. This is because the LAS curve shows the relationship between the real wage and the quantity of labor supplied. When the price level, the money wage, and the price of all other resources all increase by the same percentage, the real wage remains the same. Therefore, the quantity of labor supplied will not change, and the LAS curve will shift upward.

Suppose the Price Level, the Money Wage, and the Price