Why do wage increases along with increases of other input prices ...

[mwit1967]

Why do wage increases along with increases of other input prices impact the short-run aggregate supply but not the long-run aggregate supply, unless they reflect permanent reductions in the supply of those inputs?

Question 2

A U.S. federal budget deficit that raises real interest rates is most likely to:
 a. lead to a depreciation of the dollar in the foreign exchange market.
  b. encourage foreign investment in U.S. securities.
  c. lead to an increase in exports.
  d. lead to an appreciation of other currencies relative to the U.S. dollar.
  e. discourage imports of foreign goods.

[Alyson.hiatt@yahoo.com]

Answer to Question 1

In the short run, wages and other input prices are assumed to be constant along the short-run aggregate supply curve. If the firm has to pay more for its workers or any other input, its costs will rise. That is, the short-run aggregate supply curve will shift to the left. In contrast, a change in wages or any price is generally considered temporary. As such, such a change will not shift the long-run aggregate supply curve.

Answer to Question 2

b

[mwit1967]

Thank you

[Alyson.hiatt@yahoo.com]

Happy to help you