If wages rise faster than increases in labour productivity,then unit labour costs will
A)fall and the AS curve will shift left.
B)fall and the AS curve will shift right.
C)rise and the AS curve will shift left.
D)rise and the AS curve will shift right.
E)not change because only total labour costs change.

Question

Quizplus · Accepted Answer

Unit labor costs (ULC) refer to the ratio of labor costs to labor productivity. If wages rise faster than productivity, this means labor costs per unit of output increase, leading to a rise in ULC. As a result, the AS curve will shift left, indicating that firms are less willing to produce goods and services at the same price level. This means that higher wage costs have squeezed profit margins, causing a reduction in aggregate supply.

If Wages Rise Faster Than Increases in Labour Productivity,then Unit