The wage rate rises.As a result,in the short run Real GDP will __________ and the price level will __________.
A) rise; rise
B) fall; fall
C) remain constant; fall
D) fall; rise
E) rise; fall

Question

Quizplus · Accepted Answer

In the short run, an increase in the wage rate typically leads to higher production costs for businesses. This often results in a decrease in the quantity of goods and services produced (fall in Real GDP) as companies may cut back on production due to higher costs. Additionally, the higher costs of production can lead to higher prices for goods and services, thus increasing the price level.

The Wage Rate Rises