In a short- run macroeconomic equilibrium, real GDP exceeds potential GDP, so if aggregate demand does not change the
A) long- run aggregate supply curve will shift leftward as the money wage rate falls.
B) long- run aggregate supply curve will shift leftward as the money wage rate rises.
C) short- run aggregate supply curve will shift leftward as the money wage rate rises.
D) short- run aggregate supply curve will shift rightward as the money wage rate falls.

Question

Quizplus · Accepted Answer

When real GDP exceeds potential GDP, the economy is producing above its sustainable capacity, leading to upward pressure on wages. As the money wage rate rises, the short-run aggregate supply curve shifts leftward, reducing output back towards potential GDP.

In a Short- Run Macroeconomic Equilibrium, Real GDP Exceeds Potential