-In the figure above, the economy is at an equilibrium with real GDP of $16 trillion and a price level of 110. As the economy moves toward its ultimate equilibrium, the ________ curve shifts ________ because ________.
A) aggregate supply; rightward; the money wage rate falls
B) potential GDP; leftward; the money wage rate falls
C) aggregate supply; leftward; the money wage rate rises
D) aggregate demand; rightward; the money wage rate falls
E) aggregate demand; leftward; the money wage rate rises

Question

-In the figure above, the economy is at an equilibrium with real GDP of $16 trillion and a price level of 110. As the economy moves toward its ultimate equilibrium, the ________ curve shifts ________ because ________.
A) aggregate supply; rightward; the money wage rate falls 
B) potential GDP; leftward; the money wage rate falls 
C) aggregate supply; leftward; the money wage rate rises 
D) aggregate demand; rightward; the money wage rate falls 
E) aggregate demand; leftward; the money wage rate rises

Quizplus · Accepted Answer

The aggregate supply curve shifts rightward when the money wage rate falls because lower wages increase the profitability of producing goods and services, leading firms to increase output at every price level.

-In the Figure Above, the Economy Is at an Equilibrium