When the reservation wage is adjusted to account for a higher inflation rate:
A)the aggregate demand curve shifts to the right.
B)the price level falls.
C)the short-run Phillips curve shifts outward.
D)production costs of businesses decline.
E)the aggregate supply curve shifts to the right.

Question

Quizplus · Accepted Answer

When the reservation wage is adjusted for higher inflation, it typically leads to higher wage demands, which can increase production costs and lead to higher inflation, causing the short-run Phillips curve to shift outward.

When the Reservation Wage Is Adjusted to Account for a Higher