As this point it is useful to draw some conclusions from the preceding two sections concerning the way in which allowing price and wage flexibility affects the policy implica tions of the ian system. In section 8.3 we saw that when the price level was assumed to vary(the money still fixed), policy multipliers were reduced relative to their values wage in the simple IS LM 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 ad ditional units of output is the money wage divided by the marginal product of labor, firms will supply a greater output only at a higher pri even if the money fixed. ag gregate supply curve was seen to be upward-slop and increases in aggregate demand con sequently had smaller output effects than with the horizontal aggregate supply curve.