What happens to short-run aggregate supply when employers face higher nominal wages?

When employers face higher nominal wages, the short-run aggregate supply curve shifts to the left. This occurs because higher wages increase the cost of production for firms. In the short run, as wages rise, companies need to spend more on labor costs, which can lead them to reduce the quantity of goods and services they are willing to supply at any given price level. Consequently, the overall supply in the economy decreases due to the higher costs associated with production, leading to a leftward shift of the short-run aggregate supply curve.

In contrast, if wages remained unchanged, the short-run aggregate supply would not experience any shifts. A rightward shift would imply that the economy is producing more at the same price levels, often associated with decreases in production costs, which is not the case here. The concept of perfect inelasticity indicates that supply would not change in response to price changes whatsoever, which does not apply in this scenario as higher wages do indeed impact production costs.