Whether aggregate supply shifts quickly or slowly to restore equilibrium at potential output depends crucially on
A)how quickly planned investment spending adjusts to changes in population growth
B)how quickly planned consumption spending adjusts to changes in the price level and nominal wages
C)how quickly technology changes to increase aggregate supply
D)whether the economy is experiencing a contractionary gap or an expansionary gap
E)how quickly real wages adjust to restore full employment in the labor market

Question

Quizplus · Accepted Answer

The speed at which aggregate supply shifts to restore equilibrium at potential output is largely determined by how quickly real wages adjust, as this affects labor market conditions and the economy's return to full employment.

Whether Aggregate Supply Shifts Quickly or Slowly to Restore Equilibrium