If the Price Level Falls and the Money Wage Rate

question 32

Multiple Choice

If the price level falls and the money wage rate does not change, some firms ________ and there is ________.

• A) shut down; a leftward shift of the aggregate supply curve
• B) shut down; a decrease in potential GDP
• C) start up; a rightward shift of the aggregate supply curve
• D) shut down; a decrease in the quantity of real GDP supplied
• E) start up; an increase in potential GDP

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Definitions:

Variable Costs

Costs that move in parallel with the rate of goods or services output.

Sensitivity Analysis

The study of how the variation in the output of a model can be attributed to different variations in the inputs of the model, used to predict the impact of changes in economic variables.

Earnings Before Taxes

The income a company generates before taking into account the income tax expense.

Sales Price

The amount a buyer pays to purchase a product or service.