Economics homework help?

[Ashley]

Which of the statements are true and which ones are false? Why?

a) Short-run aggregate supply curves reflect an inverse relationship between the price level and the level of real output.

b) The long-run aggregate supply curve assumes that nominal wages are fixed.

c) In the long run an increase in the price level will result in an increase in nominal wages.


I think B is true but not sure.

Thanks.

[Royal Horse]

You are right. A is false

[Robert M]

A- False- originally I said true but I meant False, and my explanation is correct....sorry. (in the short run, if prices rise, output will seek to maximize profit by selling as much as possible....think Exxon Mobil when gas prices rise)

B- False (By definition: Long-Run Aggregate Supply always allows for nominal wage changes. In the Short-Run, this is not the case as it doesn't have time to occur)

C- True (because when prices rise, REAL wages fall. To compensate for this, NOMINAL wages must increase to get back to where workers were before)