If both the price level and nominal incomes change by the same percentage:
A) real GDP will remain constant.
B) the aggregate supply curve will be upward-sloping.
C) profit margins will change in real terms.
D) the long-run aggregate supply curve will be horizontal.

Question

Quizplus · Accepted Answer

If both the price level and nominal incomes change by the same percentage, then real income (which is nominal income adjusted for inflation) remains constant. As a result, there would be no change in real GDP, as real GDP is a measure of the economy's output adjusted for inflation. This is because the change in price levels would offset the change in nominal incomes, leaving real incomes and real GDP the same.

If Both the Price Level and Nominal Incomes Change by the Same