If equilibrium GDP is below potential,then
A) unemployment is unusually low
B) the Fed will lower the money supply
C) the wage rate will fall as workers compete for scarce jobs
D) the aggregate supply curve will shift leftward
E) the wage rate will remain stable as labor productivity increases

Question

Quizplus · Accepted Answer

If equilibrium GDP is below potential, there is a surplus of labor in the market, leading to increased competition among workers for jobs. This will result in a decrease in the wage rate to reach a new equilibrium.

If Equilibrium GDP Is Below Potential,then