Aggregate Supply: Draw me a SRAS(AS) graph, start at the equilibrium of Price Level 5 and...

Aggregate Supply: Draw me a SRAS(AS) graph, start at the equilibrium of Price Level 5 and RGDP at 100. Assume there is minimum wage law now in effect. The minimum wage is higher that the wage rate prior. Show me this, assume the shift changes Price Level by 2 and RGDP by 20. Explain the shift.

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Expert Solution

Ans) Minimum wage will increase the cost for firms. As a result, aggregate supply will decrease and AS curve will shift to the left. Price level will increase and output will decrease.

Rahul Sunny answered 2 years ago

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