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

Question

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

Quizplus · Accepted Answer

A rightward shift in the aggregate supply curve can occur due to a decrease in the cost of production, such as when the money wage rate falls. This makes production more profitable at every price level, increasing the quantity of goods and services supplied without changing the potential GDP, which is determined by factors like technology and resources, not by changes in the price level or wages.

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