Then Tami labor supply curve is upward sloping.
Changes in wages and salaries lead to changes in the amount of labor required. If wage rates go up, employers will want to hire fewer workers. The amount of labor demanded decreases and rises along the demand curve.
If unemployment is high, you will find nominal wages to become less flexible downwards in the short term. As wages rise, AS shifts to the left and the aggregate price level rises.
Wage increases cause inflation because when firms pay their employees more, the cost of producing goods and services rises. To offset the increased costs, businesses will have to charge more for their goods and services to maintain the same level of profitability.
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