Full-employment output can increase for all of the following reasons EXCEPT
A)increased productivity.
B)increased capital stock.
C)increased labor.
D)increase in the price level.

Question

Quizplus · Accepted Answer

An increase in the price level leads to inflation and decreases the purchasing power of money. This can lead to higher costs for businesses, which may cause them to produce less or lay off workers, thus reducing the level of output and employment. Therefore, an increase in the price level does not lead to an increase in full-employment output. On the other hand, increased productivity, increased capital stock, and increased labor can all contribute to an increase in full-employment output.

Full-Employment Output Can Increase for All of the Following Reasons