A decrease in the money wage rate increases ________ and an increase in the full-employment quantity of labor increases ________.
A) the SAS and the LAS; only the SAS
B) the SAS and the LAS; only the LAS
C) only the SAS; the SAS and the LAS
D) only the LAS; the SAS and the LAS

Question

Quizplus · Accepted Answer

A decrease in the money wage rate increases the short-run aggregate supply (SAS) because it reduces production costs, making it cheaper for firms to produce goods and services, thus increasing the quantity of goods and services supplied in the short run. An increase in the full-employment quantity of labor increases both the short-run aggregate supply (SAS) and the long-run aggregate supply (LAS) because it expands the economy's productive capacity by increasing the number of workers available to produce goods and services, thus shifting both the SAS and LAS curves to the right.

A Decrease in the Money Wage Rate Increases ________ and an Increase