Which of the following will reduce the price level and increase real output in the long run?
A) an increase in the money supply
B) an increase in wage rates
C) a decrease in the money supply
D) technical progress

Question

Quizplus · Accepted Answer

Technical progress increases productivity, which leads to an increase in real output in the long run. As long as the money supply does not increase with the increase in real output, prices will fall, resulting in a reduction in the price level. An increase in wage rates would increase costs for businesses and likely lead to an increase in prices, which is the opposite of what is desired. A decrease in the money supply may lead to a short-term decrease in prices but would likely lead to a decrease in output and an increase in unemployment in the long run.

Which of the Following Will Reduce the Price Level and Increase