If the price level falls and the money wage rate does not change, some firms ________ and there is ________.
A) shut down; a leftward shift of the aggregate supply curve
B) shut down; a decrease in potential GDP
C) start up; a rightward shift of the aggregate supply curve
D) shut down; a decrease in the quantity of real GDP supplied
E) start up; an increase in potential GDP

Question

Quizplus · Accepted Answer

When the price level falls and the money wage rate remains unchanged, firms may shut down because their costs remain the same while their revenues decrease, leading to a decrease in the quantity of real GDP supplied.

If the Price Level Falls and the Money Wage Rate