Figure 16.1
-Refer to Figure 16.1 to answer this question. Suppose the economy is initially at Point A. If labor leaders successfully negotiate a wage increase and the Fed does nothing, then the economy will experience a/n
A) deflation and a recession.
B) deflation and an expansion.
C) inflation and a recession.
D) inflation and an expansion.

Question

Figure 16.1
-Refer to Figure 16.1 to answer this question. Suppose the economy is initially at Point A. If labor leaders successfully negotiate a wage increase and the Fed does nothing, then the economy will experience a/n
A) deflation and a recession. 
B) deflation and an expansion. 
C) inflation and a recession. 
D) inflation and an expansion.

Quizplus · Accepted Answer

A wage increase typically raises production costs, leading to higher prices (inflation). If the Fed does nothing, the higher costs can reduce aggregate supply, potentially causing a recession.

Figure 16.1 -Refer to Figure 16.1 to Answer This Question. Suppose the Suppose