-Refer to the Above Diagram

question 3

Multiple Choice

-Refer to the above diagram.If aggregate supply shifts from AS₁ to AS₂,then the price level will:

• A) increase and real domestic output will increase.
• B) decrease and real domestic output will increase.
• C) increase and real domestic output will decrease.
• D) decrease and real domestic output will decrease.

---

Definitions:

Efficiency Wage Theory

Explanation for the presence of unemployment and wage discrimination which recognizes that labor productivity may be affected by the wage rate.

Productivity

The measure of the efficiency of production, often quantified as output per unit of input.

Wages

Wages are the payments made to labor for their services, typically calculated on an hourly, daily, or piecework basis, and are a primary form of income for employees.

Rules of Thumb

General principles that provide practical instructions or guidelines, typically based on experience rather than theory.