-If output is below its natural real GDP, A. workers and firms will strike barga

Question

-If output is below its natural real GDP,

A. workers and firms will strike bargains for higher wages. This increase in wages shifts the short-run aggregate supply curve right.

B. workers and firms will strike bargains for higher wages. This increase in wages shifts the short-run aggregate supply curve left.

C. workers and firms will strike bargains for lower wages. This decrease in wages shifts the short-run aggregate supply curve right.

D. workers and firms will strike bargains for lower wages. This decrease in wages shifts the short-run aggregate supply curve left.

Explanation / Answer

Ans)

C. workers and firms will strike bargains for lower wages. This decrease in wages shifts the short-run aggregate supply curve right.

If the output level is below the natural GDP , lower wages will shift the aggregate supply curve to the right.

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