Which of the following statements regarding aggregate supply are CORRECT?
A) Moving along the long-run aggregate supply curve, both the price level and the money wage rate change by the same percentage.
B) Moving along the short-run aggregate supply curve, both the price level and the money wage rate change by the same percentage.
C) Moving along the long-run aggregate supply curve, the money wage rate changes but the price level is constant.
D) Moving along the short-run aggregate supply curve, the money wage rate changes but the price level is constant.

Question

Quizplus · Accepted Answer

In the long-run aggregate supply (LRAS), changes in the price level are accompanied by proportional changes in the money wage rate to keep real wages constant, allowing full employment output to remain unchanged. This is why moving along the LRAS curve, both the price level and the money wage rate change by the same percentage.

Which of the Following Statements Regarding Aggregate Supply Are CORRECT