If an economy is producing beyond its full employment output, nominal wages will start to increase, which causes the short-run aggregate supply curve to Blank______.

Question

Multiple choice question.

become vertical

shift left

shift right

become horizontal

Answer 1

If an economy is producing beyond its full employment output, nominal wages will start to increase, which causes the short-run aggregate supply curve to shift left.

This is because higher wages increase production costs for firms, which can lead to a decrease in aggregate supply at any given price level.