An Increase in the Price Level and a Reduction in Output

question 31

Multiple Choice

An increase in the price level and a reduction in output would result from

• A)an increase in the money supply.
• B)an increase in government expenditures.
• C)a fall in stock prices.
• D)bad weather in farm states.

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Definitions:

Inflation Expectations

The rate at which people expect prices to increase over a period, influencing their economic behavior.

Long-Run Average Unemployment Rate

The unemployment rate that is expected to prevail in the long-term, factoring in the natural movement of the workforce in and out of jobs.

Market Power of Unions

The capacity of labor unions to influence wages, working conditions, and employment levels through collective bargaining.

Minimum Wage

The lowest legal salary that employers can pay workers, set by government laws to ensure a minimum standard of living for employees.