Suppose total factor productivity increases. Which of the following is incorrect?

Question

Quizplus · Accepted Answer

An increase in total factor productivity should lead to an increase in output, which means more goods and services are produced. This, in turn, should lead to higher consumption and an increase in real income for households. Furthermore, if output goes up, it is likely that employment will increase as well, which could put upward pressure on real wages rather than downward pressure. Therefore, the incorrect statement is C, which suggests that real wages go down.

Suppose Total Factor Productivity Increases