"Moving along the AS curve, the real wage rate is constant while moving along the potential GDP line, the real wage rate changes." Explain whether the previous statement is correct or incorrect
What will be an ideal response?
The statement is incorrect. It reverses the situation. Moving along the AS curve, the money wage rate is constant and so the real wage rate changes. Moving along the potential GDP line, money wage rates have adjusted to the change in the price level and so the real wage rate is constant.
Economics
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