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Based on the figure above, the aggregate supply curve shifts rightward and the potential GDP line does not change when
A)the price level rises.
B)the money wage rate falls.
C)the price level falls.
D)the money wage rate rises.
E)both the price level and money wage rate rise by the same proportion.

Question

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Based on the figure above, the aggregate supply curve shifts rightward and the potential GDP line does not change when
A)the price level rises. 
B)the money wage rate falls. 
C)the price level falls. 
D)the money wage rate rises. 
E)both the price level and money wage rate rise by the same proportion.

Quizplus · Accepted Answer

A fall in the money wage rate reduces production costs, allowing firms to supply more at each price level, shifting the aggregate supply curve rightward without affecting potential GDP.

- Based on the Figure Above, the Aggregate Supply Curve Shifts