A fall in the price level brings a ________ in the real wage rate that ________ profits and can lead to ________.
A)rise;reduces;firms going out of business
B)rise;reduces;new firms entering business
C)fall;increases;firms going out of business
D)rise;increases;new firms entering business
E)fall;decreases;new firms entering business

Question

Quizplus · Accepted Answer

A fall in the price level means that the prices of goods and services are decreasing. This means that the real wage rate, which is the amount of goods and services that a worker can buy with their wages, will increase. This is because the same amount of wages will now buy more goods and services. A rise in the real wage rate reduces profits because businesses have to pay more for labor. This can lead to firms going out of business if they are unable to cover their costs.

A Fall in the Price Level Brings a ________ in the Real