During 2012,a country reports that its price level fell and the money wage rate did not change.These changes led to a(n)________ because their country experienced a(n)________.
A)decrease in the quantity of real GDP supplied;higher real wage rate and lower profits for firms
B)increase in the quantity of real GDP supplied;higher real wage rate and lower profits for firms
C)decrease in the quantity of real GDP supplied;lower real wage rate and lower profits for firms
D)increase in the quantity of real GDP supplied;lower real wage rate and higher profits for firms
E)decrease in aggregate demand;economic expansion

Question

Quizplus · Accepted Answer

When the price level falls and the money wage rate does not change, the real wage rate increases. This leads to a decrease in the quantity of real GDP supplied because firms are less willing to produce at the higher real wage rate. The higher real wage rate also leads to lower profits for firms.

During 2012,a Country Reports That Its Price Level Fell and the Money