-In the above figure, the economy is currently at point A. Suppose that the money wage rate and the price level both fall by 10 percent. Firms will be willing to supply output equal to
A) less than $18.0 trillion.
B) $18.0 trillion.
C) more than $18.0 trillion.
D) Without more information, it is impossible to determine which of the above answers is correct.

Question

-In the above figure, the economy is currently at point A. Suppose that the money wage rate and the price level both fall by 10 percent. Firms will be willing to supply output equal to
A) less than $18.0 trillion. 
B) $18.0 trillion. 
C) more than $18.0 trillion. 
D) Without more information, it is impossible to determine which of the above answers is correct.

Quizplus · Accepted Answer

When both the money wage rate and the price level fall by the same percentage, the real wage remains unchanged, so firms will supply the same level of output, which is $18.0 trillion.

-In the Above Figure, the Economy Is Currently at Point