Suppose that there is a decrease in the costs of production that shifts the short-run aggregate-supply curve right. If there is no policy response, then eventually
a) because unemployment is high, wages will be bid up and short-run aggregate-supply curve will shift right.
b) because unemployment is high, wages will be bid down and short-run aggregate-supply curve will shift right.
c) because unemployment is low, wages will be bid up and short-run aggregate-supply curve will shift right.
d) because unemployment is low, wages will be bid up and short-run aggregate-supply curve will shift left.
Ans: d) because unemployment is low, wages will be bid up and short-run aggregate-supply curve will shift left.
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