A sudden,unexpected increase in the economy's prevailing wage level due to a general strike threat would
A) shift the aggregate demand curve out and push equilibrium prices down
B) shift the aggregate demand curve in and push equilibrium output down
C) shift the short run aggregate supply curve in and push equilibrium prices up
D) shift the Phillips Curve in and increase the natural rate of unemployment
E) shift the long run aggregate supply curve out and push equilibrium prices down

Question

Quizplus · Accepted Answer

A sudden, unexpected increase in the economy's prevailing wage level due to a general strike threat would shift the short run aggregate supply curve in and push equilibrium prices up. This is because the increase in wages would increase production costs, leading to a decrease in the quantity of goods and services supplied at each price level. This would result in a higher price level at the new equilibrium output level.

A Sudden,unexpected Increase in the Economy's Prevailing Wage Level Due