Why does the short-run aggregate supply curve slope upward to the right? If the prices of both

(a) resources and

(b) goods and services increased proportionally (by the same percentage), would business firms be willing to expand output? Why or why not?

*4. Suppose prices had been rising at 3 percent annually in recent years. A major union signs a threeyear contract calling for increases in money wage rates of 6 percent annually. What will happen to the real wages of the union members if the price level is constant (unchanged) during the next three years? If other unions sign similar contracts, what will probably happen to the unemployment rate?

Why? Answer the same questions under conditions in which the price level increases at an annual rate of 8 percent during the next three years.