Along the aggregate supply curve,the quantity of real GDP supplied increases when the price level rises because
A)profits decrease.
B)the real wage rate falls.
C)the real wage rate rises.
D)the real wage rate and profits both fall.
E)the demand for the goods and services increases.

Question

Quizplus · Accepted Answer

When the price level rises, the real wage rate falls if nominal wages are sticky, leading to lower labor costs and higher profits, which incentivizes firms to increase production, thus increasing the quantity of real GDP supplied.

Along the Aggregate Supply Curve,the Quantity of Real GDP Supplied