curve model of chapter 7, where both the price level and the money wage had been fixed. In that simple IS LM curve model the implicit assumption was that the aggregate supply curve was horizontal. Supply was no barrier to an increase in output. In the model in section 8.3 we were taking account of the fact that in normal circumstances, as out- put increases the marginal product of labor declines. Because the unit cost of producing additional units of output is the money wage divided by the marginal product of labor, firms will supply a greater output only at a higher price even if the money fixed. aggregate supply curve was seen to be upward-slop and increases in aggregate demand consequently had smaller output effects than with the horizontal aggregate supply curve.