Which of the following will reduce the price level and increase real output in the long run?
A)An increase in the money supply.
B)An increase in wage rates.
C)A decrease in the money supply.
D)Technical progress.

Question

Quizplus · Accepted Answer

Technical progress increases productivity, which in turn increases the supply of goods and services and lowers their cost. This leads to a decrease in the price level and an increase in real output in the long run. An increase in the money supply may lead to short-run increases in output and employment, but it will eventually lead to inflation and higher prices. An increase in wage rates will increase production costs and ultimately lead to higher prices. A decrease in the money supply will lead to lower output and employment in the short run, but it may help to reduce inflation in the long run.

Which of the Following Will Reduce the Price Level and Increase