The aggregate supply curve shifts
A)rightward if potential GDP decreases.
B)rightward if the money wage rate falls.
C)rightward if the money wage rate rises.
D)leftward if potential GDP increases.
E)leftward if the aggregate demand curve shifts leftward.

Question

Quizplus · Accepted Answer

The aggregate supply curve shifts rightward if the money wage rate falls. This is because a decrease in the money wage rate means that labor costs for firms decrease, leading to a decrease in production costs and an increase in the overall level of output. Factors that can lead to a decrease in the money wage rate include a decrease in the bargaining power of workers, an increase in the supply of workers, or a decrease in the price level.

The Aggregate Supply Curve Shifts