If people correctly expect an increase in aggregate demand, their money wage rate ________ immediately, the SAS curve shifts ________.
A) rises; rightward
B) rises; leftward
C) falls; rightward
D) fall; leftward

Question

Quizplus · Accepted Answer

If people expect an increase in aggregate demand, they anticipate higher prices and demand higher wages, causing the money wage rate to rise. This increase in wages raises production costs, shifting the Short-Run Aggregate Supply (SAS) curve leftward.

If People Correctly Expect an Increase in Aggregate Demand, Their