Because of Improved Productivity, Wages Increase 10 Percent

question 294

Multiple Choice

Because of improved productivity, wages increase 10 percent. As a result, gross domestic income increases. What happens to Gross Domestic Product?

• A) Gross Domestic Product also increases since consumption expenditures would increase.
• B) Gross Domestic Product decreases as people pay more taxes on their higher incomes.
• C) Gross Domestic Product would not change since consumption expenditures would rise but investment spending would fall.
• D) Gross Domestic Product would decrease because businesses are spending more on wages.

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Definitions:

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An agent who acts on behalf of another person (the principal) without expecting or receiving any form of compensation.

Consideration

Something of value exchanged between parties in a contract, making the agreement legally binding.

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A legal relationship in which one party, the agent, acts on behalf of another, the principal, in dealings with third parties.