Exhibit 20A-2  Macro AD/AS Models in Panel (B) of Exhibit

question 29

Multiple Choice

Exhibit 20A-2  Macro AD/AS Models In Panel (b) of Exhibit 20A-2, the economy is initially in short-run equilibrium at real GDP level Y₁ and price level P₂. If the federal government or Fed decides to intervene, it would most likely:

• A) decrease taxes.
• B) increase the money supply.
• C) increase the level of government spending for goods and services.
• D) decrease the level of government spending for goods and services.

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Definitions:

Real Wages

Wages adjusted for inflation, representing the purchasing power of the income received by workers for their labor.

Wage Differentials

The variations in wage rates due to factors like occupation, industry, geographic location, or skills, affecting income distribution among workers.

Productivity

A measure of the efficiency of production, often quantified as the ratio of output to inputs in a manufacturing or production process.

Human Capital

The collective skills, knowledge, or other intangible assets of individuals that can be used to create economic value for the individuals, their employers, or their community.