In Japan in 2000 the price level fell by 5 percent and nominal wage rates did not change. As a result, there was a
A) rightward shift in Japanʹs short-run aggregate supply curve.
B) movement down along Japanʹs short-run aggregate demand curve.
C) movement down along Japanʹs long-run aggregate supply curve.
D) movement down along Japanʹs short-run aggregate supply curve.

Question

Quizplus · Accepted Answer

A fall in the price level, ceteris paribus, causes a movement down along the short-run aggregate supply curve. Nominal wage rates did not change, so there would be no shift in the curve. The long-run aggregate supply curve is unaffected by changes in the price level, so there would be no movement along that curve.

In Japan in 2000 the Price Level Fell by 5