An adverse supply shock with a vertical supply of labor curve will
A)raise the price level and leave unemployment unchanged.
B)raise unemployment and lower the price level.
C)raise both unemployment and the price level.
D)lower both unemployment and the price level.

Question

Quizplus · Accepted Answer

An adverse supply shock with a vertical supply of labor curve will raise the price level due to the decreased supply of goods and services while leaving unemployment unchanged because the vertical supply of labor curve indicates that the quantity of labor supplied does not change with the wage rate.

An Adverse Supply Shock with a Vertical Supply of Labor