If the money wage rate and other resource prices do not change when the price level rises by 10 percent,
A) the long-run aggregate supply curve shifts leftward.
B) the short-run aggregate supply curve shifts leftward.
C) the long-run aggregate supply curve shifts rightward.
D) there is movement along the short-run aggregate supply curve.

Question

Quizplus · Accepted Answer

When the price level rises by 10 percent but the money wage rate and other resource prices do not change, it results in a movement along the short-run aggregate supply curve rather than a shift. This is because the short-run aggregate supply curve represents how much output is supplied at different price levels, holding wage rates and other input prices constant.

If the Money Wage Rate and Other Resource Prices Do