Moving along the potential GDP line, when the price level changes, the i. real wage rate stays at the full-employment equilibrium level.
Ii. money wage rate changes by the same percentage.
Iii. money prices of non-labor resources change by the same percentage.
A)i only
B)ii only
C)iii only
D)i and ii
E)i, ii, and iii

Question

Quizplus · Accepted Answer

When moving along the potential GDP line, the real wage rate remains constant at full-employment equilibrium, and both the money wage rate and the money prices of non-labor resources adjust by the same percentage as the price level change to maintain equilibrium.

Moving Along the Potential GDP Line, When the Price Level