A decrease in the price level accompanied by no change in the money wage rate leads to ________ movement along the ________ aggregate supply curve.
A) a downward; short-run
B) an upward; short-run
C) a downward; long-run
D) an upward; long-run

Question

Quizplus · Accepted Answer

A decrease in the price level with no change in the money wage rate leads to a downward movement along the short-run aggregate supply curve because firms will produce less output as the real wage cost increases, reducing profitability.

A Decrease in the Price Level Accompanied by No Change