Suppose that in an attempt to protect workers, Congress imposes legislation that makes it more difficult and time consuming to reduce workers' nominal wages. How would SRAS and LRAS be affected by this change?

A) the SRAS curve would become steeper and the LRAS curve would remain unchanged

B) neither curve would be affected

C) The SRAS curve would become flatter and the LRAS curve would remain unchanged

D) The SRAS curve would shift to the right and the LRAS curve would shift to the right

Suppose that in an attempt to protect workers, Congress imposes legislation that makes it more difficult and time consuming to reduce workers' nominal wages. How would SRAS and LRAS be affected by this change?

A) the SRAS curve would become steeper and the LRAS curve would remain unchanged

Explanation: The imposition of this legislation will decrease the quantity of labor demanded in the labor market and will shift the demand curve for labor to the left. Since labor is an input, because of the decrease in this input, the short-run supply in the goods market will become less price elastic. This means that an increase in price will not lead to a big increase in the quantity of goods supplied. This is because labor isn't readily available in the short-run to meet with the high increase in production. However, this issue will be resolved in the long-run. Hence, the legislation which affects the labor market directly, makes the SRAS curve steeper whereas the LRAS curve remains unchanged.