The government of Inventia has increased its expenditure following a recession.This is likely to lead to ________.
A) lower real wages
B) an increase in the demand for labor
C) higher interest rates
D) a decrease in the price level

Question

Quizplus · Accepted Answer

An increase in government expenditure is likely to lead to an increase in the demand for labor as more funds will be put towards public projects, which would require an increase in employment. This would lead to a rise in wages as there is more competition for workers. However, there is no reason to expect a change in interest rates or the price level based on this information alone. Lower real wages would also not be a direct consequence of increased government expenditure.

The Government of Inventia Has Increased Its Expenditure Following a Recession.This