During 2010,a country reports that its price level fell and the money wage rate did not change.These changes led to
A)a higher real wage rate,lower profits,and a decrease in the quantity of real GDP supplied.
B)a higher real wage rate,higher profits,and an increase in the quantity of real GDP supplied.
C)a lower real wage rate,lower profits,and a decrease in the quantity of real GDP supplied.
D)a lower real wage rate,higher profits,and an increase in the quantity of real GDP supplied.
E)no change in the real wage rate and an increase in aggregate demand.

Question

Quizplus · Accepted Answer

When the price level falls and the money wage rate remains unchanged, the real wage rate increases. This leads to lower profits for firms, as their costs remain the same while prices for their goods and services decrease. Consequently, firms reduce the quantity of real GDP supplied.

During 2010,a Country Reports That Its Price Level Fell and the Money