Consider the basic AD/AS model.A rise in an input price like the wage rate would be expected to create a new macroeconomic equilibrium,which in comparison to the original equilibrium,has a price level that is
A)higher and a real GDP that is higher.
B)higher and a real GDP that is lower.
C)higher and a real GDP that is the same.
D)lower and a real GDP that is higher.
E)lower and a real GDP that is lower.

Question

Quizplus · Accepted Answer

A rise in an input price, such as the wage rate, would shift the aggregate supply curve to the left, leading to a higher price level and a lower real GDP in the new equilibrium. This reflects the increased cost of production, which reduces output and increases prices.

Consider the Basic AD/AS Model