Which of the following is a crucial factor in determining whether aggregate supply shifts quickly or slowly to restore equilibrium at potential output?
A) how quickly planned investment spending adjusts to changes in population growth
B) how quickly planned consumption spending adjusts to changes in the price level and nominal wages
C) how quickly technology changes to increase aggregate supply
D) how quickly real wages adjust to restore full employment in the labour market

Question

Which of the following is a crucial factor in determining whether aggregate supply shifts quickly or slowly to restore equilibrium at potential output?  
A) how quickly planned investment spending adjusts to changes in population growth 
B) how quickly planned consumption spending adjusts to changes in the price level and nominal wages 
C) how quickly technology changes to increase aggregate supply 
D) how quickly real wages adjust to restore full employment in the labour market

Quizplus · Accepted Answer

The speed at which real wages adjust to restore full employment in the labor market is crucial for determining how quickly aggregate supply shifts to restore equilibrium at potential output. This is because real wage adjustments affect the cost of labor, influencing firms' production costs and thus the aggregate supply curve's position.

Which of the Following Is a Crucial Factor in Determining