Based on price setting behavior,which of the following will cause a reduction in the price level?
A)an increase in productivity
B)a reduction in the nominal wage
C)a reduction in the markup
D)all of the above
E) none of the above

Question

Quizplus · Accepted Answer

An increase in productivity will reduce firms' production costs, allowing them to lower their prices without reducing their profit margins. A reduction in the nominal wage will reduce firms' costs of production and allow them to lower prices without sacrificing profit margins. Similarly, a reduction in the markup will reduce the amount by which firms mark up their prices above their costs, which will lower prices without sacrificing profits. Therefore, all three choices will cause a reduction in the price level.

Based on Price Setting Behavior,which of the Following Will Cause