course tion Completion Status: O C as people revise their price-level expectatio

Question

course tion Completion Status: O C as people revise their price-level expectations downward, firms and workers strike bargains for higher nominal wages e d as people revise their price-level expectations downward, firms and workers strike bargains for lower nominal wages. QUESTION S Suppose that there is an increase in the costs of production that shifts the short-run aggregate supply curve left If there is no policy response, then eventually O a because unemployment is low wages will be bid up an Short run aggregate supply will shift right. O b because unemployment is low, wages will be bid down and short run aggregate supply will shift right. Oc because unemployment is high, wages will be bid up and short-run aggregate supply will shit right. o d: because unemployment is high, wages wall be bid down and short-run aggregate supply wil hiftright. QUESTION 6 The most important reason for the slope of the aggregate-demand curve is that as the price level increases, interest rates increase, and investment decreases

Explanation / Answer

5. Option D is correct.

When there is an increase in the cost of production the short run aggregate supply curve shifts to the left.

But since there is no policy response, the nominal wages start to decline and the unemployment rates starts to rise.

This will eventually lead to the short run aggregate supply curve shifting to the right.

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