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Which of the following events will shift the Short Run Aggregate Supply curve to the left?Choose one answer from the options below.real wages rise.inflation expectations decrease.land costs fall.a fall in interest rates.None of the Above.BackNext

Question

Which of the following events will shift the Short Run Aggregate Supply curve to the left?Choose one answer from the options below.real wages rise.inflation expectations decrease.land costs fall.a fall in interest rates.None of the Above.BackNext

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Solution

The event that will shift the Short Run Aggregate Supply (SRAS) curve to the left is when real wages rise.

Here's why:

The SRAS curve shows the relationship between the price level and the quantity of real GDP supplied in the short run. It slopes upward because nominal wages are sticky in the short run – they do not adjust quickly to changes in economic conditions.

When real wages rise, it means that the cost of labor, which is a key input in production, has increased. Firms respond to higher labor costs by reducing the quantity of goods and services they supply at any given price level, causing the SRAS curve to shift to the left.

So, the correct answer is "real wages rise".

This problem has been solved

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