In the Basic AD/AS Macro Model,which of the Following Events

question 62

Multiple Choice

In the basic AD/AS macro model,which of the following events would cause stagflation?

• A)a large decrease in wages
• B)a large increase in business confidence
• C)a large increase in the net tax rate
• D)a large increase in the price of raw materials
• E)a large increase in labour productivity

---

Definitions:

Efficiency Wage Equilibrium

A state in which employers pay above-market wages to increase productivity and reduce turnover among employees.

Demand for Labor

The total amount of workers that employers are willing and able to hire at a given wage rate in a certain period.

Efficiency Wage

A theory suggesting that higher wages may increase worker productivity and efficiency by attracting better applicants, reducing turnover, and increasing worker morale.

Contract Curve

Curve showing all efficient allocations of goods between two consumers, or of two inputs between two production functions.