Author Question: If the money wage rate rises and potential GDP remains the same, does the LAS curve or the SAS curve ... (Read 34 times)

bclement10 · **on:** Jun 29, 2018

If the money wage rate rises and potential GDP remains the same, does the LAS curve or the SAS curve shift or is there a movement along the LAS curve or the SAS curve?

What will be an ideal response?

Question 2

With regard to transition economies what is meant by shock therapy?

What will be an ideal response?

uniquea123 · **Reply #1 on:** Jun 29, 2018

Answer to Question 1

If the money wage rate rises and potential GDP remains the same there is a decrease in short-run aggregate supply and no change in long-run aggregate supply. The SAS curve shifts leftward and the LAS curve is unchanged.

Answer to Question 2

Shock therapy is an approach to transition from socialism to market capitalism that advocates rapid deregulation of prices, liberalization of trade, and privatization.