An increase in the price level and a reduction in output would result from
A)a fall in stock prices.
B)a decrease in the supply of an important resource.
C)an increase in government expenditures.
D)an increase in taxes.

Question

Quizplus · Accepted Answer

A decrease in the supply of an important resource would cause the cost of production to increase, leading to a decrease in output and an increase in the price level. A fall in stock prices, an increase in government expenditures, and an increase in taxes would not necessarily lead to a decrease in output.

An Increase in the Price Level and a Reduction in Output