A common assumption among macroeconomists is that when real GDP is less than potential output,factor prices adjust and the
A)AS curve shifts to the left fairly rapidly.
B)AS curve shifts to the right only very slowly.
C)AS curve shifts to the right very rapidly.
D)AD curve shifts to the left rapidly.
E)None of the above - the AS curve remains unchanged.

Question

Quizplus · Accepted Answer

When real GDP is less than potential output, there is excess capacity in the economy. This means that firms can increase output without having to raise factor prices. As a result, the AS curve shifts to the right.

A Common Assumption Among Macroeconomists Is That When Real GDP