A common assumption among macroeconomists is that when real GDP is less than potential output, factor prices adjust and the
A)AS curve shifts to the left fairly rapidly.
B)AS curve shifts to the right very rapidly.
C)AS curve shifts to the right only very slowly.
D)AD curve shifts to the left rapidly.
E)none of the above -- the AS curve remains unchanged.

Question

Quizplus · Accepted Answer

When real GDP is less than potential output, factor prices, such as wages, tend to decrease slowly, leading to a gradual rightward shift of the Aggregate Supply (AS) curve as the economy adjusts back to potential output.

A Common Assumption Among Macroeconomists Is That When Real GDP