The economy experiences a decrease in the price level and an increase in real domestic output. Which is a likely explanation?
A) Consumer incomes and the quantity of labor have decreased.
B) Business costs and wage rates have decreased.
C) The prices of imported resources have increased.
D) National income abroad has increased.

Question

Quizplus · Accepted Answer

A decrease in business costs and wage rates would lead to a decrease in price levels and an increase in real domestic output. This is because businesses can produce goods and services more efficiently and at a lower cost, leading to an increase in supply and a decrease in prices. Additionally, lower wage rates would lead to a decrease in production costs and, in turn, lower prices for consumers.

The Economy Experiences a Decrease in the Price Level and an Increase