For movements along the short-run aggregate supply curve
A) the money wage rate is constant.
B) the real wage rate changes.
C) potential GDP remains constant.
D) All of the above are correct.

Question

Quizplus · Accepted Answer

Movements along the short-run aggregate supply curve imply that the price level changes while all other factors, including the money wage rate, remain constant. This leads to changes in the real wage rate because it is adjusted for inflation. Potential GDP remains constant because movements along the curve do not reflect changes in the economy's productive capacity, but rather changes in the production level due to price level variations.

For Movements Along the Short-Run Aggregate Supply Curve